COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE COUNCIL AND THE COURT OF AUDITORS CONSOLIDATED ANNUAL ACCOUNTS OF THE EUROPEAN UNION 2016
Date: 2017-06-26
Institutions: Directorate-General for Budget, European Commission
Subjects: balance sheet, consolidated account, financial situation, general budget (EU), implementation of the budget

EN 

   EN 

   EUROPEAN COMMISSION  Brussels, 26.6.2017  COM(2017) 365 final   COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE COUNCIL AND THE COURT OF AUDITORS CONSOLIDATED ANNUAL ACCOUNTS OF THE EUROPEAN UNION 2016  
 
 
 
 
 
 
 
 
 
 
CONTENTS 

FOREWORD ................................................................................................................. 3 

EUROPEAN UNION POLITICAL FRAMEWORK, GOVERNANCE AND ACCOUNTABILITY ............... 5 

NOTE ACCOMPANYING THE CONSOLIDATED ACCOUNTS .................................................. 11 

CONSOLIDATED FINANCIAL STATEMENTS AND EXPLANATORY NOTES ............................... 12 

BALANCE SHEET .................................................................................................... 14 
STATEMENT OF FINANCIAL PERFORMANCE ................................................................. 15 
CASHFLOW STATEMENT .......................................................................................... 16 
STATEMENT OF CHANGES IN NET ASSETS .................................................................. 17 
NOTES TO THE FINANCIAL STATEMENTS .................................................................... 18 

FINANCIAL STATEMENT DISCUSSION AND ANALYSIS ..................................................... 88 

BUDGETARY IMPLEMENTATION REPORTS AND EXPLANATORY NOTES .............................. 103 

GLOSSARY .............................................................................................................. 104 

 
 
 
 
 
 
 
 
 
 
 
FOREWORD 

It  is  my  pleasure  to  present  the  2016  annual  accounts  of  the  European 
Union. These accounts provide a complete overview of the finances of the 
EU  for  2016  –  this  includes  information  on  the  financial  position  of  the 
Union, how the budget has been implemented for the year, its contingent 
liabilities,  as  well  as  the  financial  commitments  and  obligations  that  the 
Union  has  undertaken.  Reflecting  the  multiannual  nature  of  the  Union's 
activities,  the  accounts  include  explanations  of  the  key  financial  figures 
and their evolution. 

2016  was  a  year  full  of  achievements  but  also  challenges  for  the 
European  Union.  The  EU  budget  focused  on  strengthening  economy, 
boosting  jobs  and  growth  and  investing  in  research.  The  European 
economy  and  labour  market  conditions  improved  and  unemployment  in 
the EU went down.  

Less than a  year and  a half  after its launch,  the  European Fund for Strategic Investments (EFSI), 
the centrepiece of the Investment Plan for Europe, has already delivered tangible results. Active in all 28 
Member States this Fund mobilized more than EUR 190 billion of investments by mid May 2017, which is 
more than half of the target of EUR 315 billion set for mid-2018, contributing to the economic recovery. 
At the end of 2016, the guarantee fund which covers the EFSI operations undertaken by the EIB group 
had been provisioned by funds from the EU budget and totalled EUR 1 billion in these annual accounts. 

Boosting  jobs,  growth  and  investment  remains  the  overarching  priority  for  the  EU  budget.  The 
Commission  continues  its  efforts  to  strengthen  EU's  economic  recovery  and  to  invest  in  its  youth  and 
jobseekers,  as  well  as in  start-ups  and  small  and  medium  sized  enterprises  (SMEs).  A  good  example  is 
the  Loan  Guarantee  Facility  under  the  ‘COSME’  programme  (‘Competitiveness  of  enterprises  and  small 
and  medium-sized  enterprises’)  which  continued  to  be  very  successful  in  2016,  also  thanks  to  the 
additional  risk-bearing  capacity  from  EFSI.  At  the  end  of  2016,  more  than  143  000  small  and  medium 
sized  enterprises  in  21  countries  have  already  received  financing  of  more  than  EUR 5.5 billion  with  the 
support of the COSME programme. 

The research and innovation programme Horizon 2020 is key for building an innovation and knowledge-
based  economy  and  society  within  the  EU.  It  succeeded  in  reaching  49  000  participations  and  grant 
agreements  were  signed  for  a  total  amount  of  EUR  20.5  billion.  Over  21 %  of  all  participations  were 
SMEs.  The  increase  of  the  Horizon  2020  activities  is  evidenced  by  the  almost  40 %  increase  in  the 
Horizon 2020 guarantee instruments included in these accounts when compared to last year. 

Following the declaration of  Initial Services in  2016,  the Galileo-programme,  setting up Europe's  own 
global  satellite  navigation  system,  transitioned  from  the  deployment  to  the  exploitation  phase  in  2016. 
The  value  of  the  operational  Galileo  satellites  and  ground  infrastructure  included  in  these  accounts 
amounted  to  EUR 2 billion  at  the  end  of  2016.  The  implementation  of  projects  under  Horizon  2020 
encouraged  the  development  of  new  Galileo  applications.  These  projects  have  already  led  to  13 
innovations being brought to the market, 5 patents, 34 advanced prototypes, two products on the market 
and 223 published scientific papers. The  Global Navigation Satellite System market is expected to grow 
from 5.8 billion devices in use in 2017 to an estimated 8 billion by 2020. 

The  Connecting  Europe  Facility  (CEF)  for  Transport  with  its  objective  to  facilitate  infrastructure 
projects’  access  to  financing  in  the  sectors  of  transport,  telecommunications  and  energy  contributed  to 
the 64 km long Brenner Base Rail tunnel which will be the longest high capacity rail tunnel in the world. 
The  CEF  debt  instrument  included  in  the  accounts  offers  risk-sharing  for  debt  financing  in  the  form  of 
senior and subordinated debt or guarantee as well as support for project bonds. 

In  2016  the  European  response  to  new  challenges  emerging  from  the  shifting  geopolitical  situation 
continued. The EU budget provided support to Member States in properly managing migration flows, 
addressing  the  root  causes  of  migration  and  safeguarding  the  Schengen  area.  The  implementation  of 
Member States' national programmes under the Asylum, Migration and Integration Fund and the Internal 
Security Fund gathered pace in 2016.  

 
 
 
 
 
 
 
 
 
 
The  Commission  also  established  the  Facility  for  refugees  in  Turkey  which  became  operational  on 
17 February 2016  and  for  which  the  accounts  include  EUR 630 million  of  Member  States  contributions 
cashed  in  2016.  This  enabled  the  Commission,  among  other  initiatives,  to  launch  an  innovative 
programme  called  the  Emergency  Social  Safety  Net,  aiming  at  assisting  up  to  one  million  of  the  most 
vulnerable  refugees  in  Turkey  with  regular  cash  allocations.  This  is  an  example  of  an  increasing  use  of 
assistance  from  the  EU  budget  as  an  efficient  and  effective  way  of  getting  aid  to  people  in  emergency 
situations. 

In  June  2016,  the  Commission  proposed  a  new  Partnership  Framework  with  third  countries  under  the 
European  Agenda  on  Migration.  The  Framework  is  a  European  approach  to  deepening  cooperation  with 
countries  of  origin,  transit  and  destination  of  migratory  flows.  It  is  supported  by  most  of  the  'Global 
Europe'  programmes  of  the  budget,  and  also  by  the  relevant  EU  Trust  Funds,  in  particular  the  Trust 
Fund  for  Syria,  which  is  included  in  the  annual  accounts.  Adequate  funding  for  the  Partnership 
Framework is essential to be able to intensify cooperation with the priority partner countries and continue 
the efforts on the Central Mediterranean migration route. 

Other global challenges, such  as addressing climate change,  continued to be a priority of the 
EU  budget.  In  2016  the  total  contribution  to  climate  mainstreaming  was  estimated  at  20.9 %,  in  line 
with the target set for the current MFF period 2014-2020.  

In budgetary terms, the European Structural and Investment Funds and the Common Agricultural 
Policy remain the main investment instruments of the EU. The EU budget spent EUR 57.4 billion in 2016 
on farming and rural development and, despite earlier delays in the start-up and implementation of the 
current MFF, EUR 37.8 billion was spent on the Economic, Social and Territorial Cohesion.  

The Commission has launched a debate on the future and priorities of an EU with 27 Member States. We 
will continue working together to build a more prosperous, competitive and secure future.  

Commissioner for Budget and Human Resources, European Commission 

Günther H. Oettinger 

 
 
 
 
 
 
                    
 
 
 
Annual accounts of the European Union 2016 

EUROPEAN UNION POLITICAL 
FRAMEWORK, GOVERNANCE AND 
ACCOUNTABILITY 

The  European  Union  (EU)  is  a  union  on  which  its  281  European  countries  (the  Member  States)  confer 
competences to attain objectives they have in common. The Union is founded on the values of respect for 
human dignity, freedom, democracy, equality, the rule of law and respect for human rights, including the 
rights of persons belonging to minorities. These values are common to the Member States in a society in 
which  pluralism,  non-discrimination,  tolerance,  justice,  solidarity  and  equality  between  women  and  men 
prevail. 

1. 

POLITICAL FRAMEWORK 

EU Treaties 

The  overarching  objectives  and  principles  that  guide  the  Union  and  the 
European  Institutions  are  defined  in  the  Treaties.  The  Union  and  the  EU 
institutions  may  only  act  within  the  limits  of  the  competences  conferred  by 
the Treaties so as to attain the objectives set out therein and must do this in 
accordance with the principles2 of subsidiarity and proportionality. 

To  attain  its  objectives  and  carry  out  its  policies,  the  Union  provides  itself  with  the  necessary  financial 
means.  The  Commission is responsible for  implementing the objectives in  cooperation with  the Member 
States and in accordance with the principle of sound financial management. 

The EU  pursues the objectives established  in  the Treaty  with a number of  tools,  one of which is the EU 
budget. Others are, for example, proposing legislation or pursuing policy strategies.  

Europe 2020  
strategy 

The  Europe  2020  strategy  agreed  in  2010  by  the  Heads  of  State  or 
Government of EU Member States defines a 10 year jobs and growth strategy 
at  EU  level  for  the  EU3.  The  strategy  put  forward  three  mutually  reinforcing 
priorities  of  smart,  sustainable  and  inclusive  growth  with  five  EU  headline 
targets. Its success depends on all the actors of the Union, acting collectively.  
The EU budget is only one of the EU levers contributing to the delivery of the Europe 2020 objectives. A 
wide  range  of  actions  at  national,  EU  and  international  levels  are  being  mobilised  to  deliver  concrete 
results on the Europe 2020 strategy. 

Commission political 
priorities 

The Commission's political priorities are defined in the political guidelines set 
by  the  President  of  the  Commission,  providing  a  roadmap  for  the 
Commission's action that is fully consistent and compatible with Europe 2020 
as Europe's long-term growth strategy.  

1   On 29 March 2017, the United Kingdom (UK) gave formal notification of its intention to leave the EU thus triggering 

the withdrawal process under Article 50 of the Treaty on the European Union. 

2   Under the principle of subsidiarity, the Union shall act only if and in so far as the objectives of the proposed action 
cannot be sufficiently achieved by the Member States but can rather, by reason of the scale or effects, be better 
achieved  at  Union  level.  Under  the  principle  of  proportionality,  the  content  and  form  of  Union  action  shall  not 
exceed what is necessary to achieve the objectives of the Treaties. See Article 5 of the TFEU. 

3   See  Communication  from  the  Commission,  Europe  2020,  A  strategy  for  smart,  sustainable  and  inclusive  growth, 

COM(2010)2020, 3 March 2010. 

5 

 
 
 
 
 
 
 
 
 
 
 
                                                 
10 PRIORITIES 

Annual accounts of the European Union 2016 

A  new  boost  for  jobs,  growth  and 
investment. 

A  reasonable  and  balanced  free 
trade  agreement  with  the  United 
States. 

A connected digital single market. 

An area of Justice and Fundamental 
Rights based on mutual trust. 

A  resilient  Energy  Union  with  a 
forward-looking 
change 
policy. 

climate 

Towards a new policy on migration. 

A  deeper  and  fairer  internal  market 
with a strengthened industrial base. 

Europe as a stronger global actor. 

A  deeper  and  fairer  Economic  and 
Monetary Union (EMU). 

A Union of democratic change. 

The  policies  supported  by  the  EU  budget  are  implemented  in  accordance  with  the  multiannual  financial 
framework (MFF). 

MFF 

The MFF translates the EU’s political priorities into financial terms for at least 
5 years. It sets maximum annual amounts (ceilings) for EU expenditure as a 
whole and for the main categories of expenditure (headings). The sum of the 
ceilings of all headings gives the total ceiling of commitment appropriations.  

The MFF supports EU actions to deliver on the objectives of EU policies over a period long enough to be 
effective  and  to  provide  a  coherent  long-term  vision  for  its  beneficiaries  and  co-financing  national 
authorities.  The  2014-2020  MFF  and  its  constituent  programmes,  which  set  maximum  budget 
commitments  for  the  period  at  EUR 960 billion  and  payments  at  EUR 908 billion  (at  2011  prices),  have 
been  designed with a strong European logic and focus on added value to help deliver on the commonly 
agreed goals of the Europe 2020 jobs and growth strategy. 

The  MFF  is  agreed  by  unanimity  indicating  the  agreement  of  all  Member  States  to  the  objectives  and 
spending.  The  EU  budget  finances  a  wide  range  of  policies  and  programmes  throughout  the  EU.  In 
accordance  with  the  priorities  set  by  the  European  Parliament  and  the  Council  in  the  MFF,  the 
Commission implements spending programmes, activities and projects. Under the main spending area of 
the  European  Structural  and  Investment  Funds  (ESIF),  the  EU  legally  commits  to  implementing  these 
actions by adopting the operational programmes. 

Interinstitutional 
agreement 

The MFF is complemented with the interinstitutional agreement on budgetary 
discipline  on  cooperation  in  budgetary  matters  and  on  sound  financial 
management4  which  is  a  political  agreement  between  the  European 
Parliament, the Council and the Commission. The purpose of this agreement,  
adopted  in  2013  in  accordance  with  Article  295  of  the  TFEU,  is  to  implement  budgetary  discipline  and 
improve the functioning of the annual budgetary procedure and cooperation between the institutions on 
budgetary matters as well as to ensure sound financial management. 

4   Interinstitutional  Agreement  of  2  December  2013  between  the  European  Parliament,  the  Council  and  the 
Commission  on  budgetary  discipline,  on  cooperation  in  budgetary  matters  and  on  sound  financial  management 
(2013/C 373/01). 

6 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                 
Annual accounts of the European Union 2016 

Annual budget 

The annual budget is prepared by the Commission and usually agreed by mid-
December  by  the  European  Parliament  and  the  Council,  based  on  the 
procedure of Art. 314 TFEU. According to the principle of budget equilibrium, 
total  revenue  must  equal  total  expenditure  (payment  appropriations)  for  a 
given financial year.  

The  main  source  of  funding  of  the  EU  are  own  resources  revenues  which  are  complemented  by  other 
revenues. There are three types of own resources: traditional own resources (such as custom duties and 
sugar  levies),  the  own  resource  based  on  value  added  tax  (VAT)  and  the  own  resource  based  on  gross 
national  income  (GNI).  Other  revenues  arising  from  the  activities  of  the  EU  (e.g.  competition  fines) 
normally  represent  less  than  10 %  of  total  revenue.  The  overall  amount  of  own  resources  needed  to 
finance  the  budget  is  determined  by  total  expenditure  less  other  revenue.  The  total  amount  of  own 
resources cannot exceed 1.23 % of the sum of gross national income (GNI) of the Member States. 

The  EU's  operational  expenditure  covers  the  various  headings  of  the  MFF  and  takes  different  forms, 
depending  on  how  the  money  is  paid  out  and  managed.  The  EU  budget  is  implemented  in  three 
management modes: 

Shared  management:  under  this  method  of  budget  implementation  tasks  are  delegated  to 
Member States. About 80 % of the expenditure falls under this management mode covering such 
areas as agricultural spending and structural actions. 

Direct  management:  this  is  where  the  budget  is  implemented  directly  by  the  Commission 
services. 

Indirect management: this refers to cases where the Commission confers tasks of implementation 
of  the  budget  to  bodies  of  EU  law  or  national  law,  such  as  the  EU  agencies  or  international 
organisations. 

Financial Regulation 

The Financial Regulation (FR) applicable to the general budget is a central act 
in the regulatory architecture of the EU´s finances defining EU financial rules. 
It provides the general rules governing the EU budget. 

2.  GOVERNANCE AND ACCOUNTABILITY IN THE EU 

2.1.  INSTITUTIONAL STRUCTURE 

The organisational governance of the EU consists of institutions, agencies and other EU bodies which are 
listed in note 9 of the notes to the consolidated financial statements. The main institutions, in the sense 
of being responsible for drafting policies and taking decisions, are the European Parliament, the European 
Council, the Council and the Commission. 

The Commission is the executive of the EU and promotes its general interest. It does this by proposing 
legislation;  implementing  EU  policies;  overseeing  the  correct  implementation  of  the  Treaties  and 
European law; managing the EU budget; and by representing the Union outside Europe. 

The  Commission's  internal  functioning  is  based  on  a  number  of  key  principles  underpinning  good 
governance:  clear  roles  and  responsibilities,  a  strong  commitment  to  performance  management  and 
compliance  with  the  legal  framework,  clear  accountability  mechanisms,  a  high  quality  and  inclusive 
regulatory framework, openness and transparency, and high standards of ethical behaviour. 

7 

 
 
 
 
 
 
 
 
Annual accounts of the European Union 2016 

2.2.  THE COMMISSION'S GOVERNANCE STRUCTURE 

The European Commission has a unique governance system, with a clear distinction between political and 
administrative  oversight  structures  and  well-defined  lines  of  responsibility  and  financial  accountability. 
The system is based on the Treaties and the structure has evolved to adapt to a changing environment 
and to remain in line with best practice as set out in relevant international standards5.  

 

 

The  College  of  Commissioners  assumes  collegial  political  responsibility  for  the  work  of  the 
Commission.  Operational  implementation  of  the  budget  is  delegated  to  Directors-General  and 
Heads of Service who lead the administrative structure of the Commission6.  

The  College  delegates  financial  management  tasks  to  the  Directors-General  or  Heads  of  Service 
who  thereby  become  Authorising  Officers  by  Delegation  (AOD).  These  tasks  can  further  be 
delegated  to  Directors,  Heads  of  Unit  and  others,  who  thereby  become  Authorising  Officers  by 
Sub-Delegation.  The  responsibility  of  the  Authorising  Officers  covers  the  entire  management 
process,  from  determining  what  needs  to  be  done  to  achieve  the  policy  objectives  set  by  the 
institution  to  managing  the  activities  launched  from  both  an  operational  and  budgetary 
standpoint. 

In  the  Commission,  the  roles  and  responsibilities  in  financial  management  are  thus  clearly  defined  and 
applied.  This  is  a  decentralised  approach  with  clear  responsibilities  with  the  aim  of  creating  an 
administrative culture that encourages civil servants to take responsibility  for  activities over which they 
have control and to give them control over the activities for which they are responsible. 

Within  the  context  of  the  Commission's  Strategic  Planning  and  Programming  cycle,  each  authorising 
officer is required to prepare an "annual activity report" (AAR) on the activities and policy achievements 
and results of the year where he/she declares that resources have been used based on the principles of 
sound financial management and that he has set in place control procedures which provide the necessary 
guarantee  concerning  the  legality  and  regularity  of  the  underlying  transactions.  At  Commission's  level 
these  results  are  adopted  and  published  in  an  aggregated  form  in  the  Annual  Management  and 
Performance Report for the budget and sent to the European Parliament and the Council and is the main 
instrument through which the College of Commissioners takes political responsibility for the management 
of the budget. 

The Accounting Officer of the Commission is centrally responsible for the treasury management, recovery 
procedures, laying down accounting rules based on International Public Sector Accounting Standards and 
methods,  validating  accounting  systems  and  the  preparation  of  the  Commission's  and  consolidated 
annual  accounts  of  the  EU.  Furthermore,  the  Accounting  Officer  is  required  to  sign  the  annual  accounts 
declaring  that  they  present  fairly,  in  all  material  aspects,  the  financial  position,  the  results  of  the 
operations  and  the  cash  flows.  The  Accounting  Officer  is  an  independent  function  and  bears  a  major 
responsibility as regards financial reporting in the Commission. The Internal Auditor of the Commission is 
likewise a centralised and independent function. 

The  Corporate  Management  Board  plays  a  role  in  the  corporate  governance  of  the  Commission  by 
providing  oversight  and  strategic  orientations  on  major  corporate  management  issues,  including  in 
relation  to  the  management  of  financial  and  human  resources.  Chaired  by  the  Secretary-General,  it 
brings  together  on  a  regular  basis  Directors-General  and  Cabinets  responsible  for  budget,  human 
resources and IT to ensure that the necessary organisational and technical structures are in place in the 
Commission to deliver on the political priorities of the President in an efficient and effective manner. 

2.3.  ROBUST PERFORMANCE FRAMEWORK 

Implementing  robust  performance  frameworks  is  essential  for  ensuring  a  strong  focus  on  results,  EU 
added  value  and  sound  management  of  EU  programmes.  The  performance  of  the  EU  budget  must 
consider the multiplicity of objectives as well as the complementarity and mainstreaming of policies and 

5  
6  

E.g. internal control standards are based on the COSO 2013 Internal Control principles. 
As a result, the term 'European Commission' is used to denote both the institution – the College - formed by 
the Members of the Commission, and its administration managed by the Directors-General of its departments 
(and heads of other administrative structures such as services, offices and executive agencies). 

8 

 
 
 
                                                 
Annual accounts of the European Union 2016 

programmes and the key role of the Member States in implementing the EU Budget. The Commission is 
committed  to  ensuring  that  the  EU  budget  achieves  better  outcomes  for  citizens  and  that  supports  the 
political  priorities.  To  ensure  resources  are  allocated  to  priorities  and  that  every  action  brings  high 
performance  and added  value,  the Commission implements its EU  Budget  Focused on Results initiative. 
Building  on  the  2014–2020  performance  framework,  it  promotes  a  better  balance  between  compliance 
and  performance.  The  2014-2020  performance  frameworks  have  been  included  as  a  new  compulsory 
element and as a key pillar of the increased result orientation of this programming period. It foresees the 
establishment  of  clear  and  measureable  objectives,  indicators  and  targets  as  well  as  monitoring, 
reporting and evaluation arrangements. 

The Annual Management and Performance Report for the EU budget provides a comprehensive overview 
on  the  performance,  management  and  protection  of  the  EU  budget.  It  explains  how  the  EU  budget 
supports the European Union’s political  priorities, the results achieved with the EU  budget,  and the role 
the  Commission  plays  in  ensuring  and  promoting  the  highest  standards  of  budgetary  and  financial 
management. 

2.4.  FINANCIAL REPORTING 

The main element of EU financial reporting is the Integrated Financial Reporting Package (IFRP) of the EU 
which  comprises  the  consolidated  annual  accounts  of  the  EU  and  other  reports  accompanying  the 
accounts,  i.e.  the  Annual  Management  and  Performance  Report  for  the  budget  and  the  report  on  the 
follow-up to the discharge. The IFRP provides the public with a comprehensive view of the financial and 
operational situation of the EU each year. 

The  consolidated  annual  accounts  of  the  EU  provide  financial  information  on  the  activities  of  the 
institutions,  agencies  and  other  bodies  of  the  EU  from  both  an  accrual  accounting  and  budgetary 
perspective. These accounts do not comprise the annual accounts of Member States. 

The consolidated annual accounts of the EU consist of two separate but linked parts: 

a) 

b) 

the consolidated financial statements; and 

the  reports  on  implementation  of  the  budget,  which  provide  an  aggregated  record  of 
budget implementation. 

In  addition,  the  consolidated  annual  accounts  of  the  EU  are  accompanied  by  a  Financial  Statement 
Discussion  and  Analysis  (FSDA)  which  summarises  significant  changes  and  trends  in  the  financial 
statements  and  explains  significant  risks  and  uncertainties  the  EU  has  faced  and  needs  to  address  in 
future. 

Reporting and Accountability in the Commission: 

Integrated  Financial 
Reporting Package 

Consolidated Annual Accounts of the EU 

Annual Management and Performance Report for the budget 

Report on the follow up to the discharge 

Other reports 

General Report on the activities of the EU 

Annual Activity Reports of the Directorates-General 

Report on Budgetary and Financial Management 

9 

 
 
  
Annual accounts of the European Union 2016 

2.5.  CONTROLS 

External audit 

The  European  Court  of  Auditors  (the  Court)  is  the  external  auditor  of  the  EU  institutions  (and  bodies). 
The Court's  mission  is to  contribute to improving EU  financial management,  promote accountability and 
transparency, and act as the independent guardian of the financial interests of the citizens of the EU. The 
Court’s  role  as  the  EU’s  independent  external  auditor  is  to  check  that  EU  funds  are  correctly  accounted 
for, are raised and spent in accordance with the relevant rules and regulations and have achieved value 
for money. 

The  EU’s  annual  accounts  and  its  resource  management  are  audited  by  the  Court,  which,  as  part  of  its 
activities, draws up for the EP and the Council: 

(1) 

(2) 

an annual report on the activities financed from the general budget, detailing its observations on 
the annual accounts and underlying transactions; 

an  opinion,  based  on  its  audits  and  given  in  the  annual  report  in  the  form  of  a  statement  of 
assurance,  on  (i)  the  reliability  of  the  accounts  and  (ii)  the  legality  and  regularity  of  the 
underlying transactions involving both revenue collected and payments to final beneficiaries; and 

(3) 

special reports covering specific areas. 

Discharge 

The final step of a budget lifecycle is the discharge of the budget for a given financial year. A discharge is 
given to the Commission and all other EU institutions and bodies. The discharge represents the political 
aspect  of  the  external  control  of  budget  implementation  and  is  the  decision  by  which  the  European 
Parliament , acting on a Council recommendation, "releases" the Commission (and other EU bodies) from 
its responsibility for management of a given budget by marking the end of that budget's existence. The 
European  Parliament  is  the  discharge  authority  within  the  EU.  This  means  that  following  the  audit  and 
finalisation  of  the  annual  accounts  it  falls  to  the  Council  to  recommend  and  then  to  the  European 
Parliament to give a discharge to the Commission and other EU bodies for implementing the EU budget 
for  a  given  financial  year.  This  decision  is  based  on  an  examination  of  the  annual  accounts,  the 
Commission's  annual management  and  performance  report  for  the  budget,  the  annual  report,  the  audit 
opinion  and  special  reports  of  the  Court,  and  replies  of  the  Commission  to  questions  and  further 
information requests. 

This discharge procedure may produce three outcomes: the granting, postponement or the refusal of the 
discharge.  Integral  to  the  annual  budgetary  discharge  procedure  in  the  European  Parliament  are  the 
hearings  with  Commissioners  who  are  questioned  by  the  MEP's  in  the  Budgetary  Control  Committee 
regarding  the  policy  areas  under  their  responsibility.  The  final  discharge  report  including  specific 
recommendations  to  the  Commission  for  action  is  adopted  in  Plenary  of  the  European  Parliament.  The 
Council discharge recommendations are adopted by the Economic and Financial Affairs Council (ECOFIN). 
Both, the European Parliament's discharge report as well as the Council discharge recommendations are 
subject to an annual follow up report in which the Commission outlines the concrete actions it has taken 
to implement the recommendations made. 

10 

 
 
 
Annual accounts of the European Union 2016 

NOTE ACCOMPANYING THE 
CONSOLIDATED ACCOUNTS 

The  consolidated  annual  accounts  of  the  European  Union  for  the  year  2016  have  been  prepared  on  the 
basis  of  the  information  presented  by  the  institutions  and  bodies  under  Article  148(2)  of  the  Financial 
Regulation  applicable  to  the  general  budget  of  the  European  Union.  I  hereby  declare  that  they  were 
prepared in accordance with Title IX of this Financial Regulation and with the accounting principles, rules 
and methods set out in the notes to the financial statements. 

I have obtained from the accounting officers of these institutions and bodies, who certified its reliability, 
all the information  necessary for  the  production of  the accounts that show  the European  Union's assets 
and liabilities and the budgetary implementation. 

I hereby certify that based on this information, and on such checks as I deemed necessary to sign off the 
accounts of the European Commission, I have a reasonable assurance that the accounts present fairly, in 
all  material  aspects,  the  financial  position,  the  results  of  the  operations  and  the  cashflows  of  the 
European Union. 

[signed] 

Rosa ALDEA BUSQUETS 

Accounting Officer of the Commission 

23 June 2017 

11 

 
 
 
 
 
Annual accounts of the European Union 2016 

EUROPEAN UNION 
FINANCIAL YEAR 2016 

CONSOLIDATED FINANCIAL STATEMENTS 
AND EXPLANATORY NOTES 

It should be noted that due to the rounding of figures into millions of euros, some financial data in the 
tables below may appear not to add-up.

12 

 
 
 
 
 
 
 
 
 
 
Annual accounts of the European Union 2016 

CONTENTS 

BALANCE SHEET ........................................................................................................ 14 

STATEMENT OF FINANCIAL PERFORMANCE .................................................................... 15 

CASHFLOW STATEMENT .............................................................................................. 16 

STATEMENT OF CHANGES IN NET ASSETS ..................................................................... 17 

NOTES TO THE FINANCIAL STATEMENTS ....................................................................... 18 

1. 
2. 
3. 
4. 
5. 
6. 
7. 
8. 
9. 

SIGNIFICANT ACCOUNTING POLICIES ............................................................... 19 
NOTES TO THE BALANCE SHEET ........................................................................ 32 
NOTES TO THE STATEMENT OF FINANCIAL PERFORMANCE .................................... 57 
CONTINGENT LIABILITIES AND ASSETS ............................................................. 64 
BUDGETARY AND LEGAL COMMITMENTS ............................................................ 68 
FINANCIAL RISK MANAGEMENT ........................................................................ 72 
RELATED PARTY DISCLOSURES ........................................................................ 83 
EVENTS AFTER THE BALANCE SHEET DATE ......................................................... 85 
SCOPE OF CONSOLIDATION ............................................................................. 86 

13 

 
 
 
 
 
 
 
Annual accounts of the European Union 2016 

BALANCE SHEET 

NON-CURRENT ASSETS 
Intangible assets 
Property, plant and equipment 
Investments accounted for using the equity method 
Financial assets 
Pre-financing 
Exchange receivables and non-exchange recoverables 

CURRENT ASSETS 
Financial assets 
Pre-financing 
Exchange receivables and non-exchange recoverables 
Inventories 
Cash and cash equivalents  

TOTAL ASSETS 

NON-CURRENT LIABILITIES 
Pension and other employee benefits 
Provisions 
Financial liabilities 

CURRENT LIABILITIES 
Provisions 
Financial liabilities 
Payables 
Accrued charges and deferred income 

TOTAL LIABILITIES 

NET ASSETS 

Reserves 
Amounts to be called from Member States* 
NET ASSETS 

Note 

31.12.2016 

31.12.2015 

 EUR millions 

2.1 
2.2 
2.3 
2.4 
2.5 
2.6 

2.4 
2.5 
2.6 
2.7 
2.8 

2.9 
2.10 
2.11 

2.10 
2.11 
2.12 
2.13 

2.14 
2.15 

 381 
10 068 
 528 
62 247 
21 901 
 717 

95 842 

3 673 
23 569 
10 905 
 165 
28 585 

66 897 
162 739 

(67 231) 
(1 936) 
(55 067) 

 337 
8 700 
 497 
56 965 
29 879 
 870 

97 248 

9 907 
15 277 
9 454 
 138 
21 671 

56 448 
153 696 

(63 814) 
(1 716) 
(51 764) 

(124 234) 

(117 293) 

 (675) 
(2 284) 
(40 005) 
(67 580) 

(110 544) 
(234 778) 

 (314) 
(7 939) 
(32 191) 
(68 402) 

(108 846) 
(226 139) 

(72 040) 

(72 442) 

4 841 
(76 881) 
(72 040) 

4 682 
(77 124) 
(72 442) 

*  The  European  Parliament  adopted  a  budget  on  1  December  2016  which  provides  for  the  payment  of  the  Union's  short-term 
liabilities from own resources to be collected by, or called up from, the Member States in 2017. Additionally, under Article 83 of the 
Staff  Regulations  (Council  Regulation  259/68  of  29 February  1968  as  amended),  the  Member  States  shall  jointly  guarantee  the 
liability for pensions. 

14 

 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Annual accounts of the European Union 2016 

STATEMENT OF FINANCIAL PERFORMANCE 

Note 

2016 

2015      

EUR millions 

REVENUE 
Revenue from non-exchange transactions 
GNI resources 
Traditional own resources 
VAT resources 
Fines 
Recovery of expenses 
Other 

Revenue from exchange transactions 
Financial income 
Other 

Total Revenue 

EXPENSES 
Implemented by Member States 

European Agricultural Guarantee Fund 
European Agricultural Fund for Rural Development 
and other rural development instruments 
European Regional Development Fund and            
Cohesion Fund 
European Social Fund 
Other 

Implemented by the Commission, executive agencies 
and trust funds 
Implemented by other EU agencies and bodies 
Implemented by third countries and international 
organisations 
Implemented by other entities 
Staff and pension costs 
Changes in employee benefits actuarial assumptions 
Finance costs 
Share of result of joint ventures and associates 
Other expenses 

Total Expenses 
ECONOMIC RESULT OF THE YEAR 

3.1 
3.2 
3.3 
3.4 
3.5 
3.6 

3.7 
3.8 

3.9 

3.10 

3.11 
3.11 

3.11 
3.12 
3.13 
3.14 
3.15 
3.16 

95 578 
20 439 
15 859 
3 858 
1 947 
5 740 
143 422 

1 769 
 996 
2 765 

95 355 
18 649 
18 328 
 531 
1 547 
5 067 
139 478 

1 846 
1 562 
3 408 

146 187 

142 886 

(44 152) 
(12 604) 

(45 032) 
(16 376) 

(35 045) 

(38 745) 

(9 366) 
(1 606) 
(15 610) 

(2 547) 
(3 258) 

(2 035) 
(9 776) 
(1 068) 
(1 904) 
 2 
(5 486) 

(9 849) 
(2 380) 
(15 626) 

(1 209) 
(3 031) 

(2 107) 
(10 273) 
(2 040) 
(1 986) 
 (641) 
(6 623) 

(144 454) 
1 733 

(155 919) 
(13 033) 

15 

 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Annual accounts of the European Union 2016 

CASHFLOW STATEMENT 

Economic result of the year 
Operating activities 
Amortisation 
Depreciation 
(Increase)/decrease in loans 
(Increase)/decrease in pre-financing 
(Increase)/decrease in exchange receivables and  
non-exchange recoverables 
(Increase)/decrease in inventories 

Increase/(decrease) in pension and employee benefits liability 

Increase/(decrease) in provisions 
Increase/(decrease) in financial liabilities 
Increase/(decrease) in payables 

Increase/(decrease) in accrued charges and deferred income 

Prior year budgetary surplus taken as non-cash revenue 
Other non-cash movements 
Investing activities 
(Increase)/decrease in intangible assets and property, plant 
and equipment  
(Increase)/decrease in investments accounted for using  
the equity method 
(Increase)/decrease in available for sale financial assets 
(Increase)/decrease in financial assets at fair value 
through surplus or deficit 
NET CASHFLOW 

Net increase/(decrease) in cash and cash equivalents 
Cash and cash equivalents at the beginning of the year 
Cash and cash equivalents at year-end 

2016 
1 733 

 88 
 575 
1 774 
 (314) 
(1 297) 

 (26) 
3 417 
 581 
(2 351) 
7 813 
 (821) 
(1 349) 
 18 

EUR millions 

2015 
(13 033) 

 74 
 489 
1 591 
7 439 
5 253 

 (10) 
5 198 
 (253) 
 (977) 
(10 989) 
12 429 
(1 435) 
 32 

(2 073) 

(1 381) 

 (31) 

 (822) 
 (0) 

6 914 

6 914 
21 671 
28 585 

 (87) 

 (213) 
- 

4 126 

4 126 
17 545 
21 671 

16 

 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
STATEMENT OF CHANGES IN NET ASSETS 

 Annual accounts of the European Union 2016 

Reserves (A) 

Amounts to be called from Member 
States (B) 

BALANCE AS AT 31.12.2014 
Movement in Guarantee Fund reserve 
Fair value movements 
Other 
Allocation of the 2014 economic result 
2014 budget result credited to Member States 
Economic result of the year 
BALANCE AS AT 31.12.2015 
Movement in Guarantee Fund reserve 
Fair value movements 
Other 
Allocation of the 2015 economic result 
2015 budget result credited to Member States 
Economic result of the year 
BALANCE AS AT 31.12.2016 

Accumulated 
Surplus/(Deficit) 
(51 161) 
 (189) 
– 
 (24) 
(11 283) 
(1 435) 
– 
(64 091) 
 (82) 
– 
 (54) 
(13 038) 
(1 349) 
– 
(78 614) 

Economic result 
of the year 

(11 280) 
– 
– 
– 
11 280 
– 
(13 033) 
(13 033) 
– 
– 
– 
13 033 
– 
1 733 
1 733 

Fair value reserve  Other reserves 

4 197 
 189 
– 
 2 
 3 
– 
– 
4 390 
 82 
– 
 39 
 5 
– 
– 
4 516 

 238 
– 
 54 
– 
– 
– 
– 
 292 
– 
 33 
– 
– 
– 
– 
 325 

17 

EUR millions 

Net Assets 
=(A)+(B) 

(58 006) 
– 
 54 
 (22) 
– 
(1 435) 
(13 033) 
(72 442) 
– 
 33 
 (15) 
– 
(1 349) 
1 733 
(72 040) 

 
  
 
 
 
 
 
 
Annual accounts of the European Union 2016 

NOTES TO THE FINANCIAL STATEMENTS 

18 

 
 
 
 
 
 
 
 
 
Annual accounts of the European Union 2016 

1. 

SIGNIFICANT ACCOUNTING POLICIES 

1.1.  LEGAL BASIS AND ACCOUNTING RULES 

The  accounts  of  the  EU  are  kept  in  accordance  with  Regulation  (EU,  Euratom)  No 966/2012  of  the 
European  Parliament  and  of  the  Council  of  25 October 2012  on  the  financial  rules  applicable  to  the 
general  budget  of  the  Union  and  repealing  Council  Regulation  (EC,  Euratom)  No 1605/2002  (OJ L 298, 
26 October 2012,  p. 1)  hereinafter  referred  to  as  the  'Financial  Regulation'  and  Commission  Delegated 
Regulation  (EU)  No  1268/2012  of  29 October 2012  (OJ L 362,  31 December 2012,  p. 1)  laying  down 
detailed rules of application of this Financial Regulation. 

In accordance with article 143 of the Financial Regulation, the EU prepares its financial statements on the 
basis  of  accrual-based  accounting  rules  that  are  based  on  International  Public  Sector  Accounting 
Standards (IPSAS). These accounting rules, adopted by the Accounting Officer of the Commission, have 
to  be  applied  by  all  the  institutions  and  EU  bodies  falling  within  the  scope  of  consolidation  in  order  to 
establish a uniform set of rules for accounting, valuation and presentation of the accounts with a view to 
harmonising the process for drawing up the financial statements and consolidation. 

1.2.  ACCOUNTING PRINCIPLES 

The objective of financial statements is to provide information about the financial position, performance 
and cashflows of an entity that is useful to a wide range of users. For the EU as a public sector entity, the 
objectives are more specifically to provide information useful for decision making, and to demonstrate the 
accountability  of  the  entity  for  the  resources  entrusted  to  it.  It  is  with  these  goals  in  mind  that  the 
present document has been drawn up.  

The  overall  considerations  (or  accounting  principles)  to  be  followed  when  preparing  the  financial 
statements  are  laid  down  in  EU  accounting  rule  1  "Financial  Statements"  and  are  the  same  as  those 
described  in  IPSAS  1:  fair  presentation,  accrual  basis,  going  concern,  consistency  of  presentation, 
materiality,  aggregation,  offsetting  and  comparative  information.  The  qualitative  characteristics  of 
financial  reporting  according  to  article  144  of  the  Financial  Regulation  are  relevance,  reliability, 
understandability and comparability. 

1.3.  CONSOLIDATION 

Scope of consolidation 

The  consolidated  financial  statements  of  the  EU  comprise  all  significant  controlled  entities  (i.e.  the  EU 
institutions  (including  the  Commission)  and  the  EU  agencies),  associates  and  joint  ventures.  The 
complete  list  of  consolidated  entities  can  be  found  in  note  9  of  the  EU  financial  statements.  It  now 
comprises  52  controlled  entities  and  1  associate.  Entities  that  fall  under  the  consolidation  scope,  but 
which are immaterial to the EU consolidated financial statements as a whole, need not be consolidated or 
accounted for using equity method where to do so would result in excessive time or cost to the EU. Those 
entities  are  referred  to  as  'Minor  entities'  and  are  separately  listed  in  note  9.  In  2016,  7  entities  have 
been classified as minor entities. 

Controlled entities 

The decision to include an entity in the scope of consolidation is based on the control concept. Controlled 
entities are all entities for which the EU is exposed, or has right, to variable benefits from its involvement 
and has the liability to affect the nature and amount of those benefits through its power over the other 
entity. This power must be presently exercisable and must relate to the relevant activities of the entity. 
Controlled  entities  are  fully  consolidated.  The  consolidation  begins  at  the  first  date  on  which  control 
exists, and ends when such control no longer exists. 

19 

 
 
 
 
 
 
 
Annual accounts of the European Union 2016 

The most common indicators of control within the EU are: creation of the entity through founding treaties 
or secondary legislation, financing of the entity from the EU budget, the existence of voting rights in the 
governing bodies, audit by the European Court of Auditors and discharge by the European Parliament. An 
individual assessment for each entity is made in order to decide whether one or all of the criteria listed 
above are sufficient to result in control. 

Under  this  approach,  the  EU's  institutions  (except  the  European  Central  Bank)  and  agencies  (excluding 
the  agencies  of  the  former  2nd  pillar)  are  considered  as  under  the  exclusive  control  of  the  EU  and  are 
therefore  included  in  the  consolidation  scope.  Furthermore  the  European  Coal  and  Steel  Community 
(ECSC) in Liquidation is also considered as a controlled entity.  

All material "inter-entity transactions and balances" between EU controlled entities are eliminated, while 
unrealised gains and losses on such transactions are not material and so have not been eliminated. 

Joint Arrangements 

A joint arrangement is an agreement over which the EU and one or more parties have joint control. Joint 
control is contractually agreed sharing of control over an arrangement, which exists only when decisions 
about the relevant activities require the unanimous consent of parties sharing control. Joint agreements 
can  be  either  joint  operations  or  joint  ventures.  In  case  a  joint  arrangement  is  structured  through  a 
separate vehicle and parties to the joint arrangement have rights to the net assets of the arrangement, 
this  joint  arrangement  classifies  as  a  joint  venture.  Participations  in  joint  ventures  are  accounted  for 
using the equity method (see note 1.5.4). In case the parties have rights to the assets, and obligations 
for the liabilities, related to the arrangement, this joint arrangement is classified as a joint operation. In 
relation  to  its  interest  in  joint  operations,  the  EU  recognises  in  its  financial  statements:  its  assets  and 
liabilities,  revenue  and  expense,  as  well  as  its  share  of  assets,  liabilities,  revenue  and  expense  held  or 
incurred jointly. 

Associates 

Associates are entities over which the EU has, directly or indirectly, significant influence but not control. 
It is presumed that significant influence exists if the EU holds directly or indirectly 20 % or more of the 
voting rights. Participations in associates are accounted for using the equity method (see note 1.5.4). 

Non-consolidated entities the funds of which are managed by the Commission 

The funds of the Joint  Sickness Insurance  Scheme  for  staff of  the EU, the European Development Fund 
and  the  Participants  Guarantee  Fund  are  managed  by  the  Commission  on  their  behalf.  However,  since 
these entities are not controlled by the EU, they are not consolidated in its financial statements. 

1.4.  BASIS OF PREPARATION 

Financial  statements  are  presented  annually.  The  accounting  year  begins  on  1  January  and  ends  on 
31 December. 

1.4.1.  Currency and basis for conversion 

Functional and reporting currency 

The financial statements are presented in millions of euros, unless stated otherwise, the euro being the 
EU's functional and reporting currency. 

Transactions and balances 

Foreign currency transactions are translated into euros using the exchange rates prevailing at the dates 
of the transactions. Foreign exchange gains and losses resulting from the settlement of foreign currency 
transactions  and  from  the  re-translation  at  year-end  exchange  rates  of  monetary  assets  and  liabilities 
denominated in foreign currencies are recognised in the statement of financial performance.  Translation 
differences  on  non-monetary  financial  instruments  classified  as  available  for  sale  financial  assets  are 
included in the fair value reserve. 

20 

 
 
Annual accounts of the European Union 2016 

Different conversion methods apply to property, plant and equipment and intangible assets, which retain 
their value in euros at the rate that applied at the date when they were purchased. 

Year-end balances of monetary assets and liabilities denominated in foreign currencies are converted into 
euros on the basis of the European Central Bank (ECB) exchange rates applying on 31 December: 

Euro exchange rates 

Currency 
BGN 
CZK 
DKK 
GBP 
HRK 
HUF 

31.12.2016 
1.9558 
27.0210 
7.4344 
0.8562 
7.5597 
309.8300 

31.12.2015 
1.9558 
27.0230 
7.4626 
0.7340 
7.6380 
315.9800 

Currency 
PLN 
RON 
SEK 
CHF 
JPY 
USD 

31.12.2016 
4.4103 
4.5390 
9.5525 
1.0739 
123.4000 
1.0541 

31.12.2015 
4.2639 
4.5240 
9.1895 
1.0835 
131.0700 
1.0887 

1.4.2.  Use of estimates 

In  accordance  with  IPSAS  and  generally  accepted  accounting  principles,  the  financial  statements 
necessarily  include  amounts  based  on  estimates  and  assumptions  by  management  based  on  the  most 
reliable information available. Significant estimates include, but are not limited to: amounts for employee 
benefit  liabilities,  provisions,  financial  risk  on  inventories  and  accounts  receivable,  accrued  income  and 
charges,  contingent  assets  and  liabilities,  degree  of  impairment of  intangible assets  and  property,  plant 
and equipment and amounts disclosed in the notes concerning financial instruments. Actual results could 
differ  from  those  estimates.  Changes  in  estimates  are  reflected  in  the  period  in  which  they  become 
known. 

1.5.  BALANCE SHEET 

1.5.1. 

Intangible assets 

Acquired  computer  software  licences  are  stated  at  historical  cost  less  accumulated  amortisation  and 
impairment  losses.  The  assets  are  amortised  on  a  straight-line  basis  over  their  estimated  useful  lives 
(3-11 years). The estimated useful lives of intangible assets depend on their specific economic lifetime or 
legal  lifetime  determined  by  an  agreement.  Internally  developed  intangible  assets  are  capitalised  when 
the relevant criteria of the EU accounting rules are met and relate solely to the development phase of the 
asset.  The  costs  capitalisable  include  all  directly  attributable  costs  necessary  to  create,  produce,  and 
prepare the asset to be capable of operating in the manner intended by management. Costs associated 
with  research  activities,  non-capitalisable  development  costs  and  maintenance  costs  are  recognised  as 
expenses as incurred.   

1.5.2. 

Property, plant and equipment 

All  property,  plant  and  equipment  are  stated  at  historical  cost  less  accumulated  depreciation  and 
impairment losses. Cost includes expenditure that is directly attributable to the acquisition, construction 
or transfer of the asset. 

Subsequent  costs  are  included  in  the  asset’s  carrying  amount  or  recognised  as  a  separate  asset,  as 
appropriate,  only  when  it  is  probable  that  future  economic  benefits  or  service  potential  associated  with 
the  item  will  flow  to  the  EU  and  its  cost  can  be  measured  reliably.  Repairs  and  maintenance  costs  are 
charged to the statement of financial performance during the financial period in which they are incurred. 

21 

 
  
 
 
 
 
Annual accounts of the European Union 2016 

Land  and  works  of  art  are  not  depreciated  as  they  are  deemed  to  have  an  indefinite  useful  life.  Assets 
under  construction  are  not  depreciated  as  these  assets  are  not  yet  available  for  use.  Depreciation  on 
other  assets  is  calculated  using  the  straight-line  method  to  allocate  their  cost  less  their  residual  values 
over their estimated useful lives, as follows: 

Type of asset 
Buildings 
Space assets 
Plant and equipment 
Furniture and vehicles 
Computer hardware 
Other 

Straight line depreciation rate 

4 % to 10 % 
8 % to 20 % 
10 % to 25 % 
10 % to 25 % 
25 % to 33 % 
10 % to 33 % 

Gains  or  losses  on  disposals  are  determined  by  comparing  proceeds  less  selling  expenses  with  the 
carrying amount of the disposed asset and are included in the statement of financial performance. 

Leases 

Leases  of  tangible  assets,  where  the  EU  has  substantially  all  the  risks  and  rewards  of  ownership,  are 
classified as finance leases. Finance leases are capitalised at the inception of the lease’s commencement 
at the lower of the fair value of the leased asset and the present value of the minimum lease payments. 
The interest element of the finance lease payment is charged to expenditure over the period of the lease 
at  a  constant  periodic  rate  in  relation  to  the  balance  outstanding.  The  rental  obligations,  net  of  finance 
charges, are included in financial liabilities (non-current and current). The interest element of the finance 
cost  is  charged  to  the  statement  of  financial  performance  over  the  lease  period  so  as  to  produce  a 
constant periodic interest rate on the remaining balance of the liability for each period. The assets held 
under finance leases are depreciated over the shorter of the asset's useful life and the lease term. 

Leases where the lessor retains a significant portion of the risks and rewards inherent to ownership are 
classified as operating leases. Operating lease payments are recognised as an expense in the statement 
of financial performance on a straight-line basis over the lease term. 

1.5.3. 

Impairment of non-financial assets 

Assets  that  have  an  indefinite  useful  life  are  not  subject  to  amortisation/depreciation  and  are  tested 
annually  for  impairment.  Assets  that  are  subject  to  amortisation/depreciation  are  reviewed  for 
impairment whenever events or changes in circumstances indicate that the carrying amount may not be 
recoverable.  An  impairment  loss  is  recognised  for  the  amount  by  which  the  asset’s  carrying  amount 
exceeds  its  recoverable  (service)  amount.  The  recoverable  (service)  amount  is  the  higher  of  an  asset’s 
fair value less costs to sell and its value in use. 

Intangible  assets  and  property,  plant  and  equipment  residual  values  and  useful lives  are  reviewed,  and 
adjusted if appropriate, at least once per year. An asset’s carrying amount is written down immediately 
to  its  recoverable  (service)  amount  if  the  asset’s  carrying  amount  is  greater  than  its  estimated 
recoverable  (service)  amount.  If  the  reasons  for  impairments  recognised  in  previous  years  no  longer 
apply, the impairment losses are reversed accordingly. 

1.5.4. 

Investments accounted for using the equity method 

Participations in associates and joint ventures 

Investments accounted for using the equity method are initially recognised at cost. The EU's interest in 
these  investments  is  recognised  in  the  statement  of  financial  performance,  and  its  share  in  the 
movements in reserves is recognised in the fair value reserve in net assets. The initial cost together with 
all  movements  (further  contributions,  share  of  economic  results  and  reserve  movements,  impairments, 
and  dividends)  give  the  book  value  of  the  investment  in  the  financial  statements  at  the  balance  sheet 
date. Distributions received from the investment reduce the carrying amount of the asset. 

If the EU's share of deficits of an investment accounted for using the equity method equals or exceeds its 
interest  in  the  investment,  the  EU  discontinues  recognising  its  share  of  further  losses  ("unrecognised 
losses").  After  the  EU's  interest  is  reduced  to  zero,  additional  losses  are  provided  for  and  a  liability  is 

22 

 
Annual accounts of the European Union 2016 

recognised, only to the extent that the EU has incurred legal or constructive obligation or made payments 
on behalf of the entity. 

If  there are indications of impairment, a write-down  to the lower  recoverable amount is necessary.  The 
recoverable amount is determined as described under note 1.5.3. If the reason for impairment ceases to 
apply  at  a  later  date,  the  impairment  loss  is  reversed  to  the  carrying  amount  that  would  have  been 
determined had no impairment loss been recognised. 

In  cases  where  the  EU  holds  20 %  or  more  of  an  investment  capital  fund,  it  does  not  seek  to  exert 
significant  influence.  Such  funds  are  therefore  treated  as  financial  instruments  and  categorised  as 
available for sale financial assets. 

Associates and joint ventures classified as minor entities are not accounted for under the equity method. 
EU contributions to those entities are accounted for as an expense of the period.  

1.5.5. 

Financial assets 

Classification 

The  EU  classifies  their  financial  assets  in  the  following  categories:  financial  assets  at  fair  value  through 
surplus  or  deficit;  loans  and  receivables;  held-to-maturity  investments;  and  available  for  sale  financial 
assets. The classification of financial instruments is determined at initial recognition and re-evaluated at 
each balance sheet date. 

(i)  Financial assets at fair value through surplus or deficit 

A financial asset is classified in this category if acquired principally for the purpose of selling in the short 
term  or  if  so  designated  by  the  EU.  Derivatives  are  also  categorised  in  this  category.  Assets  in  this 
category  are  classified  as  current  assets  if  they  are  expected  to  be  realised  within  12  months  of  the 
balance sheet date. 

(ii)  Loans and receivables 

Loans  and  receivables  are  non-derivative  financial  assets  with  fixed  or  determinable  payments  that  are 
not quoted in an active market. They arise when the EU provides money, goods or services directly to a 
debtor  with  no  intention  of  trading  the  receivable,  or  in  case  the  EU  is  subrogated  to  the  rights  of  the 
original lender following a payment made by the EU under a guarantee contract. Payments due within 12 
months  of  the  balance  sheet  date  are  classified  as  current  assets.  Payments  due  after  12  months  from 
the balance sheet date are classified as non-current assets. Loans and receivables include term deposits 
with the original maturity above three months. 

(iii) Held-to-maturity investments 

Held-to-maturity  investments  are  non-derivative  financial  assets  with  fixed  or  determinable  payments 
and  fixed  maturities  that  the  EU  has  the  positive  intention  and  ability  to  hold  to  maturity.  During  this 
financial year, the EU did not hold any investments in this category.  

(iv) Available for sale financial assets 

Available  for  sale  financial  assets  are  non-derivatives  that  are  either  designated  in  this  category  or  not 
classified  in  any  of  the  other  categories.  They  are  classified  as  either  current  or  non-current  assets, 
depending  on  the  period  of  time  the  EU  expects  to  hold  them,  which  is  usually  the  maturity  date. 
Investments in entities that are neither consolidated nor accounted for using the equity method and other 
equity-type  investments  (e.g.  Risk  Capital  Operations)  are  also  classified  as  available  for  sale  financial 
assets. 

Initial recognition and measurement 

Purchases  and  sales  of  financial  assets  at  fair  value  through  surplus  or  deficit,  held-to-maturity  and 
available for sale are recognised on trade-date –  the date on which the EU commits to purchase or  sell 
the asset. Cash equivalents and loans are recognised when cash is advanced to the borrowers. Financial 
instruments are initially recognised at fair value. For all financial assets not carried at fair value through 
surplus  or  deficit  transactions  costs  are  added  to  the  fair  value  at  initial  recognition.  Financial  assets 

23 

 
Annual accounts of the European Union 2016 

carried at fair value through surplus or deficit are initially recognised at fair value and transaction costs 
are expensed in the statement of financial performance. 

The fair value of a financial asset on initial recognition is normally the transaction price (i.e. the fair value 
of the consideration received), unless the fair value of that instrument is evidenced by comparison with 
other observable current market transactions in the same instrument or based on a valuation technique 
whose  variables  include  only  data  from  observable  markets  (e.g.  in  case  of  some  derivative  contracts). 
However,  when  a  long-term  loan  that  carries  no  interest  or  an  interest  below  market  conditions  is 
granted, its fair value can be estimated as the present value of all future cash receipts discounted using 
the prevailing market rate of interest for a similar instrument with a similar credit rating. 

Loans  granted  are  measured  at  their  nominal  amount,  which  is  considered  to  be  the  fair  value  of  the 
loan. The reasoning for this is as follows: 

- 

- 

- 

The “market environment” for EU lending is very specific and different from the capital market used 
to  issue  commercial  or  government  bonds.  As  lenders  in  these  markets  have  the  opportunity  to 
choose  alternative  investments,  the  opportunity  possibility  is  factored  into  market  prices.  However, 
this opportunity for alternative investments does  not exist for  the EU which is not allowed to invest 
money on the capital markets; it only borrows funds for the purpose of lending at the same rate. This 
means  that  there  is  no  alternative  lending  or  investment  option  available  to  the  EU  for  the  sums 
borrowed. Thus, there is no opportunity cost and therefore no basis of comparison with market rates. 
In fact, the EU lending operation itself represents the market. Essentially, since the opportunity cost 
"option"  is  not  applicable,  the  market  price  does  not  fairly  reflect  the  substance  of  the  EU  lending 
transactions. Therefore, it is not appropriate to determine the fair value of EU lending with reference 
to commercial or government bonds. 

Furthermore as there is no active market or similar transactions to compare with, the interest rate to 
be used by the EU for fair valuing its lending operations under the EFSM, BOP and other such loans, 
should be the interest rate charged. 

In  addition,  for  these  loans,  there  are  compensating  effects  between  loans  and  borrowings  due  to 
their back-to-back character. Thus, the effective interest for the loan equals the effective interest rate 
for  the  related  borrowings.  The  transaction  costs  incurred  by  the  EU  and  then  recharged  to  the 
beneficiary of the loan are directly recognised in the statement of financial performance. 

Financial instruments are derecognised when the rights to receive cashflows from the investments have 
expired or the EU has transferred substantially all risks and rewards of ownership to another party. 

Subsequent measurement 

(i)  Financial assets at fair  value through  surplus or  deficit are subsequently  carried at fair value.  Gains 
and  losses  arising  from  changes  in  the  fair  value  of  the  ‘financial  instruments  at  fair  value  through 
surplus  or  deficit’  category  are  included  in  the  statement  of  financial  performance  in  the  period  in 
which they arise. 

(ii)  Loans and receivables are carried at amortised cost using the effective interest method. In the case 
of loans granted on borrowed funds, the same effective interest rate is applied to both the loans and 
borrowings since these loans have the characteristics of 'back-to-back operations' and the differences 
between the loan and the borrowing conditions and amounts are not material. The transaction costs 
incurred  by  the  EU  and  then  recharged  to  the  beneficiary  of  the  loan  are  directly  recognised  in  the 
statement of financial performance. 

(iii) Held  to  maturity  assets  are  carried  at  amortised  cost  using  the  effective  interest  method.  The  EU 

currently holds no held to maturity investments. 

(iv) Available for sale financial assets are subsequently carried at fair value. Gains and losses arising from 
changes in the fair value of available for sale financial assets are recognised in the fair value reserve, 
except  for  translation  differences  on  monetary  assets  which  are  recognised  in  the  statement  of 
financial performance. When assets classified as available for sale financial assets are derecognised or 
impaired,  the  cumulative  fair  value  adjustments  previously  recognised  in  the  fair  value  reserve  are 
recognised  in  the  statement  of  financial  performance.  Interest  on  available  for  sale  financial  assets 
calculated using the effective interest method is recognised in the statement of financial performance. 
Dividends  on  available  for  sale  equity  instruments  are  recognised  when  the  EU's  right  to  receive 
payment is established. 

24 

 
 
 
 
 
Annual accounts of the European Union 2016 

The fair values of quoted investments in active markets are based on current bid prices. If the market for 
a  financial  asset  is  not  active  (and  for  unlisted  securities  and  over-the–counter  derivatives),  the  EU 
establishes  a  fair  value  by  using  valuation  techniques.  These  include  the  use  of  recent  arm’s  length 
transactions,  reference  to  other  instruments  that  are  substantially  the  same,  discounted  cashflow 
analysis, option pricing models and other valuation techniques commonly used by market participants.  

Investments in Venture Capital Funds, classified as available for sale financial assets, which do not have a 
quoted  market  price  in  an  active  market  are  valued  at  the  attributable  net  asset  value,  which  is 
considered as an equivalent of their fair value. 

In  cases  where  the  fair  value  of  investments  in  equity  instruments  that  do  not  have  a  quoted  market 
price  in  an  active  market  cannot  be  reliably  measured,  these  investments  are  valued  at  cost  less 
impairment losses. 

Impairment of financial assets 

The EU assesses at each balance sheet date whether there is objective evidence that a financial asset is 
impaired.  A  financial  asset  is  impaired  and  impairment  losses  are  incurred  if,  and  only  if,  there  is 
objective  evidence  of  impairment  as  a  result  of  one  or  more  events  that  occurred  after  the  initial 
recognition of the asset and that loss event (or events) has an impact on the estimated future cashflows 
of the financial asset that can be reliably estimated. 

(a) 

Assets carried at amortised cost 

If  there  is  objective  evidence  that  an  impairment  loss  on  loans  and  receivables  or  held-to-maturity 
investments  carried  at  amortised  cost  has  been  incurred,  the  amount  of  the  loss  is  measured  as  the 
difference  between  the  asset’s  carrying  amount  and  the  present  value  of  estimated  future  cashflows 
(excluding  future  credit  losses  that  have  not  been  incurred)  discounted  at  the  financial  asset’s  original 
effective  interest  rate.  The  carrying  amount  of  the  asset  is  reduced  and  the  amount  of  the  loss  is 
recognised  in  the  statement  of  financial  performance.  If  a  loan  or  held-to-maturity  investment  has  a 
variable  interest  rate,  the  discount  rate  for  measuring  any  impairment  loss  is  the  current  effective 
interest rate determined under the contract. The calculation of the present value of the estimated future 
cashflows  of  a  collateralised  financial  asset  reflects  the  cashflows  that  may  result  from  foreclosure  less 
costs for obtaining and selling the collateral, whether or not foreclosure is probable. If, in a subsequent 
period,  the amount of  the  impairment loss decreases and the decrease can  be related objectively to an 
event  occurring  after  the  impairment  was  recognised,  the  previously  recognised  impairment  loss  is 
reversed through the statement of financial performance. 

(b) 

Assets carried at fair value 

In  the  case  of  equity  investments  classified  as  available  for  sale  financial  assets,  a  significant  or 
permanent (prolonged) decline in the fair value of the security below its cost is considered in determining 
whether the securities are impaired. If any such evidence exists for available for sale financial assets, the 
cumulative loss – measured as the difference between the acquisition cost and the current fair value, less 
any  impairment  loss  on  that  financial  asset  previously  recognised  in  the  statement  of  financial 
performance  –  is  removed  from  reserves  and  recognised  in  the  statement  of  financial  performance. 
Impairment  losses  recognised  in  the  statement  of  financial  performance  on  equity  instruments  are  not 
reversed through the statement of financial performance. If, in a subsequent period, the fair value of a 
debt  instrument  classified  as  available  for  sale  financial  asset  increases  and  the  increase  can  be 
objectively related to an event occurring after the impairment loss was recognised, the impairment loss is 
reversed through the statement of financial performance. 

1.5.6. 

Inventories 

Inventories are stated at the lower of cost and net realisable value. Cost is determined using the first-in, 
first-out (FIFO) method. The cost of finished goods and work in progress comprises raw materials, direct 
labour,  other  directly  attributable  costs  and  related  production  overheads  (based  on  normal  operating 
capacity). Net realisable value is the estimated selling price in the ordinary course of business, less the 
costs of completion and selling expenses. When inventories are held for distribution at no charge or for a 
nominal  charge,  they  are  measured  at  the  lower  of  cost  and  current  replacement  cost.  Current 
replacement cost is the cost the EU would incur to acquire the asset on the reporting date. 

25 

 
 
 
1.5.7. 

Pre-financing amounts 

Annual accounts of the European Union 2016 

Pre-financing is a payment intended to provide the beneficiary with a cash advance, i.e. a float. It may be 
split into a number of payments over a period defined in the particular contract, decision, agreement or 
basic legal act. The float or advance is either used for the purpose for which  it was provided during the 
period defined in the agreement or it is repaid. If the beneficiary does not incur eligible expenditure, they 
have the obligation to return the pre-financing advance to the EU. The amount of the pre-financing may 
be reduced (wholly or partially) by the acceptance of eligible costs (which are recognised as expenses).  

Pre-financing is, on subsequent balance sheet dates, measured at the amount initially recognised on the 
balance sheet less eligible expenses (including estimated amounts where necessary) incurred during the 
period.  

Interest  on  pre-financing is  recognised  as  it is  earned  in  accordance  with  the  provisions of  the  relevant 
agreement. An estimate of the accrued interest revenue, based on the most reliable information, is made 
at the year-end and included on the balance sheet. 

Other  advances  to  Member  States  which  originate  from  reimbursement  by  the  EU  of  amounts  paid  as 
advances  by  the  Member  States  to  their  beneficiaries  (including  "financial  instruments  under  shared 
management") are recognised as assets and presented under the pre-financing heading. Other advances 
to  Member  States  are  subsequently  measured  at  the  amount  initially  recognised  on  the  balance  sheet 
less  a  best  estimate  of  the  eligible  expenses  incurred  by  final  beneficiaries,  calculated  on  the  basis  of 
reasonable and supportable assumptions. 

The  EU  contributions  to  the  trust  funds  of  the  European  Development  Fund  or  other  unconsolidated 
entities are also classified as pre-financing since their purpose is to give a float to the trust fund to allow 
it to finance specific actions defined under the trust fund's objectives. The EU contributions to trust funds 
are  measured  at  the  initial  amount  of  the  EU  contribution  less  eligible  expenses,  including  estimated 
amounts where necessary, incurred by the trust fund during the reporting period and allocated to the EU 
contribution in accordance with the underlying agreement. 

1.5.8.  Exchange receivables and non-exchange recoverables 

As the EU accounting rules require a separate presentation of exchange and non-exchange transactions, 
for  the  purpose  of  drawing  up  the  accounts,  receivables  are  defined  as  stemming  from  exchange 
transactions  and  recoverables  are  defined  as  stemming  from  non-exchange  transactions,  i.e.  when  the 
EU receives value from another entity without directly giving approximately equal value in exchange (for 
example recoverables from Member States related to own resources). 

Receivables  from  exchange  transactions  meet  the  definition  of  financial  instruments  and  are  thus 
classified as loans and receivables and measured accordingly (see note 1.5.5). The financial instruments 
notes  disclosures  concerning  receivables  from  exchange  transactions  include  accrued  income  and 
deferred charges from exchange transactions as they are not material. 

Recoverables  from  non-exchange  transactions  are  carried  at  original  amount  (adjusted  for  interest  and 
penalties)  less  write-down  for  impairment.  A  write-down  for  impairment  of  recoverables  from  
non-exchange transactions is established when there is objective evidence that the EU will not be able to 
collect all amounts due according to the original terms of recoverables from non-exchange transactions. 
The amount of the write-down is the difference between the asset’s carrying amount and the recoverable 
amount. The amount of the write-down is recognised in the statement of financial performance. A general 
write-down, based on past experience, is also made for outstanding recovery orders not already subject 
to  a  specific  write-down.  See  note  1.5.14  concerning  the  treatment  of  accrued  income  at  year-end. 
Amounts  displayed  and  disclosed  as  recoverables  from  non-exchanges  transactions  are  not  financial 
instruments  as  they  do  not  arise  from  a  contract  that  would  give  rise  to  a  financial  liability  or  equity 
instrument.  However,  in  the  notes  to  the  financial  statements  recoverables  from  non-exchange 
transactions are disclosed together with receivables from exchange transactions where appropriate. 

26 

 
 
 
1.5.9.  Cash and cash equivalents 

Annual accounts of the European Union 2016 

Cash and cash equivalents are financial instruments and include cash at hand, deposits held at call or at 
short  notice  with  banks  and  other  short-term  highly  liquid  investments  with  original  maturities  of  three 
months or less. 

1.5.10.  Pension and other employee benefits 

Pension obligations 

The EU operates defined benefit pension plans. Whilst staff contribute from their salaries one third of the 
expected cost of these benefits, the liability is not funded. The liability recognised in the balance sheet in 
respect  of  defined  benefit  pension  plans  is  the  present  value  of  the  defined  benefit  obligation  at  the 
balance sheet date less the fair value of any plan assets. The defined benefit obligation is calculated by 
actuaries  using  the  projected  unit  credit  method.  The  present  value  of  the  defined  benefit  obligation  is 
determined by discounting the estimated future cash outflows using interest rates of government bonds 
that are denominated in the currency in which the benefits will be paid, and that have terms to maturity 
approximating to the terms of the related pension liability. 

Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are 
recognised  immediately  in  the  statement  of  financial  performance.  Past-service  costs  are  recognised 
immediately  in  statement  of  financial  performance,  unless  the  changes  to  the  pension  plan  are 
conditional on the employees remaining in service for a specified period of time (the vesting period). In 
this case, the past-service costs are amortised on a straight-line basis over the vesting period. 

Post-employment sickness benefits 

The  EU  provides  health  benefits  to  its  employees  through  the  reimbursement  of  medical  expenses. 
A separate fund has been created for its day-to-day administration. Both current employees, pensioners, 
widowers and their relatives benefit from the system. The benefits granted to the "inactives" (pensioners, 
orphans, etc.) are classified as "Post-Employment Employee Benefits". Given the nature of these benefits, 
an actuarial calculation is required. The liability in the balance sheet is determined on a similar basis as 
that for the pension obligations (see above). 

1.5.11.  Provisions 

Provisions are recognised when the EU has a present legal or constructive obligation towards third parties 
as a result of past events, it is more likely than not that an outflow of resources will be required to settle 
the  obligation,  and  the  amount  can  be  reliably  estimated.  Provisions  are  not  recognised  for  future 
operating  losses.  The  amount  of  the  provision  is  the  best  estimate  of  the  expenses  expected  to  be 
required  to  settle  the  present  obligation  at  the  reporting  date.  Where  the  provision  involves  a  large 
number  of  items,  the  obligation  is  estimated  by  weighting  all  possible  outcomes  by  their  associated 
probabilities (“expected value” method). 

1.5.12.  Financial liabilities 

Financial  liabilities  are  classified  as  financial  liabilities  at  fair  value  through  surplus  or  deficit  or  as 
financial  liabilities  carried  at  amortised  cost.  Borrowings  are  composed  of  borrowings  from  credit 
institutions  and  debts  evidenced  by  certificates.  They  are  recognised  initially  at  fair  value,  being  their 
issue proceeds (fair value of consideration received) net of transaction costs incurred, then subsequently 
carried  at  amortised  cost  using  the  effective  interest  method;  any  difference  between  proceeds,  net  of 
transaction costs, and the redemption value is recognised in the statement of financial performance over 
the period of the borrowings using the effective interest method.  

Financial liabilities are classified as non-current liabilities, except for maturities less than 12 months after 
the  balance  sheet  date.  In  the  case  of  loans  granted  on  borrowed  funds,  the  effective  interest  method 
may not be applied to loans and borrowings, based on materiality considerations. The transaction costs 
incurred  by  the  EU  and  then  recharged  to  the  beneficiary  of  the  loan  are  directly  recognised  in  the 
statement of financial performance. 

27 

 
Annual accounts of the European Union 2016 

EU trust funds that are considered as part of the Commission's operational activities are accounted for in 
the  Commission  accounts  and  further  consolidated  in  the  EU  annual  accounts.  Therefore,  contributions 
from  other  donors  to  the  EU  trust  funds  fulfil  the  criteria  of  revenues  from  non-exchange  transactions 
under  conditions  and  they  are  presented  as  financial  liabilities  until  the  conditions  attached  to  the 
contributions  transferred  are  met,  i.e.  eligible  costs  are  incurred  by  the  trust  fund.  The  trust  fund  is 
required to finance specific projects and return remaining funds at the time of winding-up. At the balance 
sheet  date  the  outstanding  contribution  liabilities  are  measured  at  contributions  received  less  the 
expenses  incurred  by  the  trust  fund,  including  estimated  amounts  when  necessary.  For  reporting 
purposes  the  net  expenses  are  allocated  to  the  contributions  of  other  donors  in  proportion  to  net 
contributions paid as at 31 December.  This  allocation of  contributions is only  indicative. When  the trust 
fund is wound up the actual split of remaining resources will be decided by the trust fund board. 

Financial liabilities categorised at fair value through  surplus  or deficit include derivatives  when their fair 
value  is  negative.  They  follow  the  same  accounting  treatment  as  financial  assets  at  fair  value  through 
surplus or deficit, see note 1.5.5.  

1.5.13.  Payables 

A  significant  amount  of  the  payables  of  the  EU  are  unpaid  cost  claims  from  beneficiaries  of  grants  or 
other EU funding (non-exchange transactions). They are recorded as payables for the requested amount 
when the cost claim is received. Upon verification and acceptance of the eligible costs, the payables are 
valued at the accepted and eligible amount. 

Payables  arising  from  the  purchase  of  goods  and  services  are  recognised  at  invoice  reception  for  the 
original  amount  and  corresponding  expenses  are  entered  in  the  accounts  when  the  supplies  or  services 
are delivered and accepted by the EU. 

1.5.14.  Accrued and deferred income and charges 

Transactions and events are recognised in the financial statements in the period to which they relate. At 
year-end,  if  an  invoice  is  not  yet  issued  but  the  service  has  been  rendered,  the  supplies  have  been 
delivered by the EU or a contractual agreement exists (e.g. by reference to a treaty), an accrued income 
will  be  recognised  in  the  financial  statements.  In  addition,  at  year-end,  if  an  invoice  is  issued  but  the 
services have not yet been rendered or the goods supplied have not yet been delivered, the revenue will 
be deferred and recognised in the subsequent accounting period. 

Expenses are also accounted for in the period to which they relate. At the end of the accounting period, 
accrued expenses are recognised based on an estimated amount of the transfer obligation of the period. 
The  calculation  of  accrued  expenses  is  done  in  accordance  with  detailed  operational  and  practical 
guidelines  issued  by  the  Commission  which  aim  at  ensuring  that  the  financial  statements  provide  a 
faithful  representation  of  the  economic  and  other  phenomena  they  purport  to  represent.  By  analogy,  if 
payment has been made in advance for services or goods that have not yet been received, the expense 
will be deferred and recognised in the subsequent accounting period. 

1.6.  STATEMENT OF FINANCIAL PERFORMANCE 

1.6.1.  Revenue 

REVENUE FROM NON-EXCHANGE TRANSACTIONS 

The vast majority of the EU's revenue relates to non-exchange transactions: 

GNI based resources and VAT resources 

Revenue is recognised for the period for which the Commission sends out a call for funds to the Member 
States claiming their contribution. They are measured at their “called amount”. As VAT and GNI resources 
are based on estimates of  the data for  the budgetary  year concerned,  they  may  be revised as changes 
occur until the final data are issued by the Member States. The effect of a change in estimate is included 
when determining the net surplus or deficit for the period in which the change occurred. 

28 

 
 
Traditional own resources 

Annual accounts of the European Union 2016 

Recoverables  from  non-exchange  transactions  and  related  revenues  are  recognised  when  the  relevant 
monthly  "A"  statements  (including  duties  collected  and  amounts  due  that  are  guaranteed  and  not 
contested) are received from the Member States. At the reporting date, revenue collected by the Member 
States for the period but not yet paid to the Commission is estimated and recognised as accrued income. 
The  quarterly  "B"  statements  (including  duties  neither  collected  nor  guaranteed,  as  well  as  guaranteed 
amounts  that  have  been  contested  by  the  debtor)  received  from  the  Member  States  are  recognised  as 
revenue less the collection costs to which they are entitled. In addition, a value reduction is recognised 
for the amount of the estimated recovery gap. 

Fines 

Revenue  from  fines  is  recognised  when  the  EU's  decision  imposing  a  fine  has  been  taken  and  it  is 
officially  notified  to  the  addressee.  If  there  are  doubts  about  the  undertaking's  solvency,  a  value 
reduction  on  the  entitlement  is  recognised.  After  the  decision  to  impose  a  fine,  the  debtors  have  two 
months from the date of notification: 

- 

- 

either to accept the decision, in which case they must pay the fine within the time limit laid down and 
the amount is definitively collected by the EU; 

or not to accept the decision, in which case they lodge an appeal under EU law.  

However, even if appealed, the fine must be paid within the time limit of three months laid down as the 
appeal  does  not  have  suspensory  effect  (Article  278  of  the  EU  Treaty)  or,  under  certain  circumstances 
and  subject  to  the  agreement  of  the  Commission's  Accounting  Officer,  the  debtor  may  present  a  bank 
guarantee for the amount instead. 

If the undertaking appeals against the decision, and has already provisionally paid the fine, the amount is 
disclosed  as  a  contingent  liability.  However,  since  an  appeal  against  an  EU  decision  by  the  addressee 
does  not  have  suspensory  effect,  the  cash  received  is  used  to  clear  the  recoverable.  If  a  guarantee  is 
received instead of payment, the fine remains as a recoverable. If it appears probable that the General 
Court  may  not  rule in  favour  of  the  EU,  a  provision  is  recognised  to  cover  this  risk.  If  a guarantee  had 
been  given  instead,  then  the  recoverable  outstanding  is  written-down  as  required.  The  accumulated 
interest  received  by  the  Commission  on  the  bank  accounts  where  received  payments  are  deposited  is 
recognised as revenue, and any contingent liability is increased accordingly. 

Since 2010, all provisionally cashed fines are managed by the Commission in a specifically created fund 
(BUFI) and invested in financial instruments. 

REVENUE FROM EXCHANGE TRANSACTIONS 

Revenue  from  the  sale  of  goods  and  services  is  recognised  when  the  significant  risk  and  rewards  of 
ownership of the goods are transferred to the purchaser. Revenue associated with a transaction involving 
the provision of services is recognised by reference to the stage of completion of the transaction at the 
reporting date. 

Interest income and expense 

Interest income and expense are recognised in the statement of financial performance using the effective 
interest  method.  This  is  a  method  of  calculating  the  amortised  cost  of  a  financial  asset  or  a  financial 
liability  and  of  allocating  the  interest  income  or  interest  expense  over  the  relevant  period.  When 
calculating the effective interest rate, the EU estimates cashflows considering all contractual terms of the 
financial  instrument  (for  example  prepayment  options)  but  does  not  consider  future  credit  losses.  The 
calculation  includes  all  fees  and  points  paid  or  received  between  parties  to  the  contract  that  are  an 
integral part of the effective interest rate, transaction costs and all other premiums or discounts. 

Once  a  financial  asset  or  a  group  of  similar  financial  assets  has  been  written  down  as  a  result  of  an 
impairment loss, interest income is recognised using the rate of interest to discount the future cashflows 
for the purpose of measuring the impairment loss. 

Dividend income 

Dividend income is recognised when the right to receive payment is established. 

29 

 
 
1.6.2.  Expenses 

Annual accounts of the European Union 2016 

Expenses from non-exchange transactions account for the majority of the EU's expenses. They relate to 
transfers  to  beneficiaries  and  can  be  of  three  types:  entitlements,  transfers  under  agreement  and 
discretionary grants, contributions and donations. 

Transfers  are  recognised  as  expenses  in  the  period  during  which  the  events  giving  rise  to  the  transfer 
occurred,  as  long  as  the  nature  of  the  transfer  is  allowed  by  regulation  (Financial  Regulation,  Staff 
Regulations, or other regulation) or an agreement has been signed authorising the transfer; any eligibility 
criteria have been met by the beneficiary; and a reasonable estimate of the amount can be made. 

When a request for payment or cost claim is received and meets the recognition criteria, it is recognised 
as  an  expense  for  the  eligible  amount.  At  year-end,  incurred  eligible  expenses  due  to  the  beneficiaries 
but not yet reported are estimated and recorded as accrued expenses. 

Expenses  from  exchange  transactions  arising  from  the  purchase  of  goods  and  services  are  recognised 
when  the  supplies  are  delivered  and  accepted  by  the  EU.  They  are  valued  at  original  invoice  amount. 
Furthermore,  at  the  balance  sheet  date  expenses  related  to  the  service  delivered  during  the  period  for 
which an invoice has not yet been received or accepted are estimated and recognised in the statement of 
financial performance. 

1.7.  CONTINGENT ASSETS AND LIABILITIES 

1.7.1.  Contingent assets 

A  contingent  asset  is  a  possible  asset  that  arises  from  past  events  and  of  which  the  existence  will  be 
confirmed  only  by  the  occurrence  or  non-occurrence  of  one  or  more  uncertain  future  events  not  wholly 
within  the  control  of  the  EU.  A  contingent  asset  is  disclosed  when  an  inflow  of  economic  benefits  or 
service potential is probable. 

1.7.2.  Contingent liabilities 

A contingent liability is a possible obligation that arises from past events and of which the existence will 
be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly 
within  the  control  of  the  EU;  or  a  present  obligation  that  arises  from  past  events  but  is  not  recognised 
because: it is not probable that an outflow of resources embodying economic benefits or service potential 
will be required to settle the obligation or in the rare circumstances where the amount of the obligation 
cannot be measured with sufficient reliability. 

1.8.  CASHFLOW STATEMENT 

Cashflow information is used to provide a basis for assessing the ability of the EU to generate cash and 
cash equivalents, and its needs to utilise those cashflows. 

The cashflow statement is  prepared  using the indirect method.  This means that the economic result for 
the  financial  year  is  adjusted  for  the  effects  of  transactions  of  a  non-cash  nature,  any  deferrals  or 
accruals  of  past  or  future  operating  cash  receipts  or  payments,  and  items  of  revenue  or  expense 
associated with investing cashflows. 

Cashflows  arising  from  transactions  in  a  foreign  currency  are  recorded  in  the  EU’s  reporting  currency 
(Euro), by applying to the foreign currency amount the exchange rate between the euro and the foreign 
currency at the date of the cashflow. 

The  cashflow  statement  reports  cashflows  during  the  period  classified  by  operating  and  investing 
activities (the EU does not have financing activities). 

30 

 
 
 
Annual accounts of the European Union 2016 

Operating activities are the activities of the EU that are not investing activities. These are the majority of 
the activities performed. Loans granted to beneficiaries (and the related borrowings, when applicable) are 
not  considered  as  investing  (or  financing)  activities  as  they  are  part  of  the  general  objectives  and  thus 
daily  operations  of  the  EU.  Operating  activities  also  include  investments  such  as  investments  in  the 
European  Investment  Fund  (EIF),  the  European  Bank  for  Reconstruction  and  Development  (EBRD)  and 
venture  capital  funds.  Indeed,  the  aim  of  these  activities  is  to  contribute  to  the  achievement  of  policy 
objectives. 

Investing  activities  are  the  acquisition  and  disposal  of  intangible  assets  and  property,  plant  and 
equipment  and  of  other  investments  which  are  not  included  in  cash  equivalents.  Investing  activities  do 
not include loans granted to beneficiaries. The objective is to show the real investments made by the EU. 

31 

 
 
Annual accounts of the European Union 2016 

2.  NOTES TO THE BALANCE SHEET 

ASSETS 

2.1.  INTANGIBLE ASSETS 

Gross carrying amount at 31.12.2015 
Additions 
Disposals 
Transfer between asset categories 
Other changes 
Gross carrying amount at 31.12.2016 
Accumulated amortisation at 31.12.2015 
Amortisation charge for the year 
Disposals 
Transfer between asset categories 
Other changes 
Accumulated amortisation at 31.12.2016 

Net carrying amount at 31.12.2016 
Net carrying amount at 31.12.2015 

The above amounts relate primarily to computer software. 

EUR millions  

 698 
 137 
 (22) 
0 
 7 
 820 
 (361) 
 (88) 
 12 
0 
 (2) 
 (439) 

 381 
 337 

2.2.  PROPERTY, PLANT AND EQUIPMENT 

The  Space  assets  category  covers  fixed  assets  related  to  the  two  EU  space  programmes:  the  Global 
Navigation  Satellite  Systems  (GNSS)  –  Galileo  and  EGNOS,  and  the  Copernicus  European  Earth 
observation  programme.  In  2015  fixed  assets  related  to  EGNOS  and  Copernicus,  amounting  to 
EUR 584 million, had been included under the Plant and Equipment category. 

For  Galileo,  following  the  declaration  of  the  Galileo  Initial  Services  on  15  December  2016,  a  balance  of 
EUR 2 165 million  of  satellites  and  ground  segment  assets  was  transferred  from  assets  under 
construction  to  fixed  assets,  including  14  operational  Galileo  satellites  as  well  as  ground  infrastructure. 
The  Galileo  operational  fixed  assets  amounted  to  EUR 2 146 million  at  31 December 2016,  net  of 
depreciation.  The 
(2015: 
EUR 2 110 million)  include  4 satellites  launched  in  2016  but  for  which  the  in-orbit  testing  had  not  yet 
been completed at the balance sheet date. The development of the Galileo system will continue until the 
system  reaches  its  full  operational  capacity.  When  completed,  the  Galileo  constellation will  comprise  30 
satellites. 

remaining  assets  under 

totalling  EUR 756 million 

construction 

Regarding Copernicus, EUR 1 073 million concerning the Copernicus satellites in operation (Sentinels 1A, 
2A,  3A  and  1B)  are  recognised  under  the  heading  Space  assets  (2015:  EUR 498 million),  net  of 
accumulated  depreciation.  Another  EUR 1 133 million  related  to  Copernicus  satellites  is  recognised  as 
assets under construction (2015: EUR 1 188 million). 

Fixed  assets  related  to  the  European  Geostationary  Navigation  Overlay  System  (EGNOS)  ground 
infrastructure of EUR 83 million (2015: EUR 85 million) are also included under the Space assets heading. 
In addition, EGNOS assets under construction amount to EUR 21 million (2015: EUR 14 million). 

The  assets  related  to  the  EU  space  programmes  are  being  built  with  the  assistance  of  the  European 
Space Agency (ESA). 

32 

 
 
 
 
 
 
 
 
 
 
Property, plant and equipment 

Gross carrying amount at 31.12.2015 
Additions 
Disposals 
Transfer between asset categories 
Other changes 
Gross carrying amount at 31.12.2016 
Accumulated depreciation at 31.12.2015 
Depreciation charge for the year 
Depreciation written back 
Disposals 
Transfer between asset categories 
Other changes 
Accumulated depreciation at 31.12.2016 

Land and 
Buildings 

 4 856 
  145 
  (2) 
  294 
  5 
 5 297 
 (2 701) 
  (166) 
- 
  2 
0 
0 
 (2 865) 

Space 
assets 

  725 
  14 
  (1) 
 2 864 
  1 
 3 603 
  (141) 
  (160) 
- 
  0 
- 
0 
  (301) 

NET CARRYING AMOUNT AT 31.12.2016 
NET CARRYING AMOUNT AT 31.12.2015 

 2 432 
 2 155 

 3 302 
  584 

 Annual accounts of the European Union 2016 

Plant and 
Equipment 

Furniture and 
Vehicles 

Computer 
Hardware 

  248 
  22 
  (10) 
  6 
  3 
  269 
  (176) 
  (19) 
0 
  10 
0 
  (1) 
  (186) 

  627 
  73 
  (49) 
  3 
  4 
  658 
  (517) 
  (62) 
  6 
  42 
  (2) 
  (2) 
  (535) 

Other 

  277 
  20 
  (10) 
  9 
  2 
  298 
  (182) 
  (29) 
  1 
  7 
0 
0 
  (203) 

Finance 
leases 

 2 784 
  5 
  (3) 
  (2) 
0 
 2 783 
 (1 054) 
  (100) 
- 
  3 
  2 
  (1) 
 (1 150) 

EUR millions 

 Assets under 
construction 

Total 

 3 832 
 1 639 
0 
 (3 177) 
  (3) 
 2 292 
- 
- 
- 
- 
- 
- 
– 

 13 911 
 1 945 
  (90) 
– 
  16 
 15 783 
 (5 211) 
  (583) 
  8 
  77 
– 
  (6) 
 (5 715) 

  83 
  72 

  122 
  110 

  95 
  94 

 1 633 
 1 730 

 2 292 
 3 832 

 10 068 
 8 700 

  563 
  28 
  (14) 
  3 
  4 
  583 
  (440) 
  (47) 
  1 
  13 
0 
  (2) 
  (474) 

  109 
  124 

33 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Annual accounts of the European Union 2016 

2.3.  INVESTMENTS ACCOUNTED FOR USING THE EQUITY 

METHOD 

Participations in joint ventures 
Participations in associates 
Total 

Note 
2.3.1 
2.3.2 

31.12.2016 
– 
 528 
 528 

EUR millions 

31.12.2015 
 5 
 491 
 497 

2.3.1. 

Participations in joint ventures  

There are a number of entities partially funded by the EU that meet the requirements to be accounted for 
using  the  equity  method  in  the  EU  consolidated  financial  statements  but  are  immaterial  to  the  financial 
statements as a whole, and therefore have not been accounted for using the equity method in the 2016 
consolidated  financial  statements.  These  entities  are  referred  to  as  'Minor  Entities'  -  see  note  1.3.  An 
annual  assessment  of  immateriality  is  performed  to  determine  whether  this  exclusion  continues  to  be 
justified. The EU contributions to these entities have been accounted for as an expense. Note 9 includes 
the list of those entities in 2016. 

2.3.2. 

Participations in associates 

The  participation of  the EU  in  the European Investment Fund  (EIF) is treated as an associate using the 
equity method of accounting. The EIF is the EU's financial institution specialising in providing risk capital 
and  guarantees  to  Small  and  Medium-sized  Entities  (SMEs).  The  EIF  is  located  in  Luxemburg  and 
operates as a private-public partnership, whose members are the European Investment Bank (EIB), the 
EU and a group of financial institutions. At 31 December 2016 the EU held 28.1 % of ownership interests 
in EIF (2015: 26.5 %) and 28.1 % of the voting rights (2015: 26.5 %). In accordance with its statutes, 
the  EIF  is  required  to  allocate  to  a statutory  reserve  at  least  20 %  of  its  annual  net  profit  until  the 
aggregate reserve amounts to 10 % of subscribed capital. This reserve is not available for distribution. 

Participation at 31.12.2015 
Contributions 
Dividends received 
Share of net result 
Changes in fair value reserve 
Other equity movements 
Participation at 31.12.2016 

EUR millions 
European 
Investment Fund 
 491 
 41 
 (6) 
 34 
 (0) 
 (32) 
 528 

The following carrying amounts are attributable to the EU based on its percentage of participation: 

Assets 
Liabilities 
Revenue 
Expenses 
Surplus/(deficit) 

31.12.2016 

Total EIF 
2 301 
 (423) 
240 
 (118) 
122 

EU's share 
 647 
 (119) 
 67 
 (33) 
 34 

EUR millions 

31.12.2015 

Total EIF 
2 183 
 (328) 
 192 
 (95) 
 97 

EU's share 
 578 
 (87) 
 51 
 (25) 
 26 

34 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Annual accounts of the European Union 2016 

The EU has paid in 20 % of its participation, the balance being uncalled, corresponding to an amount of 
EUR 986 million. 

Total share capital 
Paid-in 
Uncalled 

Total EIF capital 
4 382 
 (876) 
3 506 

EUR millions 
EU subscription 
1 232 
 (246) 
 986 

2.4.  FINANCIAL ASSETS 

Note 

31.12.2016 

31.12.2015 

EUR millions 

Non-current financial assets 
Available for sale financial assets 
Financial assets at fair value through surplus or deficit 
Loans 

Current financial assets 
Available for sale financial assets 
Financial assets at fair value through surplus or deficit 
Loans 

2.4.1 
2.4.2 
2.4.3 

2.4.1 
2.4.2 
2.4.3 

Total 

2.4.1.  Available for sale financial assets 

BUFI investments 
ECSC in Liquidation 
European Bank for Reconstruction and Development 

Guarantee Funds for budgetary guarantees: 
Guarantee Fund for external actions 
EFSI Guarantee Fund 

Financial Instruments financed by the EU budget: 
Horizon 2020 
Risk Sharing Finance Facility 
Connecting Europe Facility* 
ETF Start up 
Risk Capital Operations 
European Fund for South East Europe 
Other 

Total 
Non-current 
Current 

9 131 
– 
53 116 
62 247 

1 311 
 0 
2 361 
3 673 
65 920 

7 222 
– 
49 743 
56 965 

2 399 
– 
7 508 
9 907 
66 871 

31.12.2016 
2 013 
1 685 
 188 
3 886 

EUR millions 
31.12.2015 
2 647 
1 699 
 188 
4 534 

2 069 
 948 
3 017 

1 213 
 719 
 483 
 476 
 132 
 118 
 398 
3 539 
10 442 
9 131 
1 311 

2 002 
- 
2 002 

 765 
 773 
 425 
 485 
 152 
 118 
 366 
3 084 
9 620 
7 222 
2 399 

*  Previous year amounts relate to Project Bond Initiative and Loan Guarantee Instrument for TEN-T projects. These 

two instruments were merged in 2016 into the Connecting Europe Facility. 

Out of the total of EUR 10 442 million, the EU holds available for sale financial assets in the form of debt 
securities (e.g. bonds) of EUR 8 920 million, equity instruments of EUR 1 302 million and investments in 
the EIB  Unitary  Fund (money  market  fund) of  EUR 221 million.  The debt securities  and units in the EIB 
Unitary Fund are mainly used to temporarily invest the amounts allocated to the EU guarantee and risk-
sharing instruments until they are used to satisfy the guarantee calls. 

35 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Annual accounts of the European Union 2016 

BUFI investments 

Provisionally  cashed  fines  related  to  competition  cases  are  allocated  to  a  dedicated  fund  (BUFI  Fund  - 
'Budget  Fines'  Fund)  and  invested  by  the  Commission  in  debt  instruments  categorised  as  available  for 
sale financial assets. 

ECSC in Liquidation 

Regarding  the  European  Coal  and  Steel  Community  (ECSC)  in  liquidation,  all  available  for  sale  financial 
assets are debt securities denominated in EUR and quoted in an active market. 

European Bank for Reconstruction and Development 

As the European Bank for Reconstruction and Development (EBRD) is not quoted on any stock exchange 
and  in  view  of  the  contractual  restrictions  included  in  the  EBRD’s  articles  of  incorporation  relating, 
amongst others,  to the sale of  participating interests, capped  at acquisition cost and only  authorised  to 
existing shareholders, the EU's shareholding is valued at cost. 

Total EBRD capital 

29 703 
(6 207) 
23 496 

EUR millions 
Commission 
subscription at 
31.12.2016 
 900 
 (188) 
 712 

Total subscribed share capital 
Paid-in 
Uncalled 

GUARANTEE FUNDS FOR BUDGETARY GUARANTEES 

Guarantee Fund for external actions 

The  Guarantee  Fund  for  external  actions  covers  loans  guaranteed  by  the  EU  budget,  in  particular  EIB 
lending operations outside the EU financed from the EIB's own resources and loans under macro-financial 
assistance (MFA) and Euratom loans outside the EU – see note 4.1.1. It is a long-term instrument (non-
current  part:  EUR 1 946 million)  managed  by  the  EIB  and  intended  to  cover  any  defaulting  loans 
guaranteed by the EU. The Fund is endowed by payments from the EU budget, the proceeds from interest 
on investments made from the Fund's assets, and sums recovered from defaulting debtors for whom the 
Fund has had to activate its guarantee. The Fund should be maintained at a target amount corresponding 
to the 9 % of the guaranteed loans outstanding at year-end. The difference between the target amount 
and the value of the Fund's assets at year-end shall be covered from the EU budget in year n+2, while 
any surplus is paid back to the EU budget. 

EFSI Guarantee Fund 

Pursuant  to  the  EFSI  Regulation  the  EFSI  Guarantee  Fund  has  been  established  to  provide  a liquidity 
cushion against potential losses incurred by the EIB in relation to its financing and investment operations 
eligible for the EFSI EU guarantee under the EFSI Agreement - see note 4.1.1. The EFSI Guarantee Fund 
is  financed  by  contributions  from  the  EU  budget.  It  is  also  endowed  by  returns  on  guarantee  fund 
resources  invested,  revenues  received  by  the  EU  as  remuneration  for  the  guarantee  under  the  EFSI 
Agreement, and amounts recovered by the EIB from defaulting debtors in respect of previous guarantee 
calls.  The  fund  is  managed  by  the  Commission,  which  is  authorised  to  invest  the  assets  of  the  EFSI 
Guarantee Fund on the financial markets in accordance with the principle of sound financial management 
following  appropriate  prudential  rules.  The  EFSI  Guarantee  Fund  started  its  operations  in  April  2016.  It 
will  be  progressively  provisioned  and  gradually  reach  EUR 8 billion,  i.e.  50 %  of  the  total  EU  EFSI 
guarantee over a time horizon spanning from 2016 to 2022. 

FINANCIAL INSTRUMENTS FINANCED BY THE EU BUDGET 

For  an  overview  of  all  financial  instruments  financed  by  the  budget  see  the  Financial  Statement 
Discussion and Analysis. 

Horizon 2020 

Under  the  EU  Regulation  establishing  Horizon  2020  –  the  Framework  Programme  for  Research  and 
Innovation (2014-2020), new financial instruments have been established in order to enhance access to 
finance to entities engaged in research and innovation (R&I). These instruments are: the InnovFin Loan 
and Guarantee Service for R&I under which the Commission shares the financial risk related to a portfolio 

36 

 
 
 
 
 
  
 
 
 
Annual accounts of the European Union 2016 

of  new  financing  operations  entered  into  by  the  EIB;  the  InnovFin  SME  Guarantee  including  the  SME 
Initiative  Uncapped  Guarantee  Instrument  (SIUGI)  –  guarantee  facilities  managed  by  the  EIF  providing 
guarantees and counter-guarantees to the financial intermediaries for the new portfolios of loans (under 
SIUGI the Commission shares the financial risk related to the guarantee given with Member States, EIF 
and EIB); and the InnovFin Equity Facility for R&I providing for investments in venture capital funds and 
managed by the EIF.  

Risk-Sharing Finance Facility 

The  Risk-Sharing  Finance  Facility  (RSFF)  is  managed  by  the  EIB  and  the  Commission's  investment 
portfolio is used to provision financial risk for loans and guarantees given by the EIB to eligible research 
projects.  In  total,  an  EU  budget  of  up  to  EUR 1 billion  was  allocated  to  the  RSFF  under  the  2007-2013 
MFF.  Under  the  2014-2020  MFF,  there  are  no  new  budget  contributions  foreseen  to  the  RSFF.  The  EU 
overall risk is limited to the amount it contributes to the Facility. 

Connecting Europe Facility 

Pursuant  to  Regulation  (EU)  No  1316/2013,  the  Connecting  Europe  Facility  (CEF)  debt  instrument  has 
been established with the objective to facilitate infrastructure projects’ access to financing in the sectors 
of transport, telecommunications and energy. It is managed by the EIB under an agreement with the EU. 
The CEF debt financial instrument is the continuity of the Loan Guarantee Instrument for TEN-T projects 
(LGTT)  and  of  the  pilot  phase  of  the  Project  Bond  Initiative  (PBI).  The  LGTT  and  the  PBI  Portfolio  were 
merged into the CEF financial instrument with effect from 1 January 2016. It offers risk-sharing for debt 
financing in the form of senior and subordinated debt or guarantee as well as support for project bonds.  

ETF Start up 

These  are  equity  instruments  that  were  financed  by  the  Growth  &  Employment  programme,  the  MAP 
programme, the CIP programme and the Technology Transfer Pilot Project, under the trusteeship of the 
EIF,  supporting the creation and financing of  Start-Up SMEs by  investing in suitable specialised  venture 
capital funds. 

2.4.2. 

Financial assets at fair value through surplus or deficit 

Notional 
amount 
receive 
leg 
 50 

31.12.2016 

Notional 
amount 
pay leg 

Fair 
value 

 (50) 

 0 

EUR millions 

Fair 
value 

31.12.2015 

Notional 
amount 
pay leg 

– 

– 

Notional 
amount 
receive 
leg 
– 

Foreign currency  
forward contract 

In  2016  the  EU  entered  into  two  foreign  currency  forward  contracts  in  order  to  hedge  the  foreign 
currency risk related to USD denominated debt securities held in the EFSI Guarantee Fund. Under these 
currency  forward  contracts  the  EU  shall  deliver  the  contractually  agreed  notional  amount  in  foreign 
currency  ('pay  leg')  and  will  receive  the  notional  amount  in  EUR  ('receive  leg')  at  the  maturity  date. 
These derivative contracts are measured at fair value at the balance sheet date and classified as either 
financial assets or financial liabilities  at fair value through  surplus or deficit depending on whether their 
fair  value  is  positive  or  negative.  At  31  December  2016,  one  foreign  currency  forward  contract,  with  a 
notional  amount  of  EUR 50 million,  resulted  in  positive  fair  value  of  EUR 0.5 million  and  has  been 
recognised  under  financial  assets.  The  other  contract,  for  the  notional  amount  of  EUR 101 million, 
resulted in negative fair value and as such has been recognised as a financial liability - see note 2.11.2. 

At  31  December  2016  all  financial  assets  at  fair  value  through  surplus  or  deficit  are  categorised  into 
level 2 of the fair value hierarchy – see table below. 

Fair value hierarchy of financial assets measured at fair value 

Level 1: Quoted prices in active markets 
Level 2: Observable inputs other than quoted prices 
Level 3: Valuation techniques with inputs not based on 
observable market data 
Total 

31.12.2016 
8 910 
 231 
1 302 

EUR millions 
31.12.2015 
8 123 
 188 
1 310 

10 442 

9 620 

During the period there were no transfers between level 1 and level 2. 

37 

 
 
 
 
 
 
 
 
 
 
 
 
 
Annual accounts of the European Union 2016 

Reconciliation of financial assets measured using valuation techniques with inputs not based on 
observable market data (level 3) 

Opening balance at 31.12.2015 
Purchases and sales 
Gains or losses for the period in financial income or finance costs 
Gains or losses in net assets 
Transfers into level 3  
Transfers out of level 3  
Other 
Closing balance at 31.12.2016 

2.4.3. 

Loans 

Loans for financial assistance 
Other loans 

Total 

Non-current 
Current 

Note 
2.4.3.1 
2.4.3.2 

31.12.2016 
55 134 
 343 

55 477 

53 116 
2 361 

EUR millions 

1 310 
 32 
 (54) 
 13 
– 
– 
– 
1 302 

EUR millions 

31.12.2015 
56 874 
 377 

57 251 

49 743 
7 508 

2.4.3.1.  Loans for financial assistance 

EFSM 

BOP 

MFA 

Euratom 

ECSC in 

Total at 31.12.2015 
New loans 
Repayments 
Exchange differences 
Changes in carrying amount 
Impairment 
Total at 31.12.2016 
Non-current 
Current 

47 509 
4 750 
(4 750) 
- 
 (53) 
- 
47 456 
46 800 
 656 

5 811 
- 
(1 500) 
- 
 (40) 
- 
4 272 
3 050 
1 222 

3 024 
 10 
 (70) 
– 
– 
– 
2 964 
2 889 
 75 

Liqui-     
dation 
 229 
- 
- 
 (33) 
 (5) 
- 
 191 
 101 
 90 

 301 
– 
 (49) 
– 
– 
– 
 252 
 199 
 53 

EUR millions 
Total 

56 874 
4 760 
(6 369) 
 (33) 
 (98) 
– 
55 134 
53 039 
2 096 

The change in carrying amount corresponds to the change in accrued interests. 

Nominal  value  of  loans  for  financial  assistance  at  31  December  2016  total  EUR 54 373 million  (2015: 
EUR 56 011 million).  

EFSM enables the granting of financial assistance to a Member State in difficulties or seriously threatened 
with severe difficulties caused by exceptional circumstances beyond its control. The assistance may take 
the  form  of  a  loan  or  credit  line.  The  ECOFIN  Council  conclusions  of  9 May 2010  restrict  the  facility  to 
EUR 60 billion  but  the  legal limit  restricts  the  outstanding  amount  of  loans  or  credit  lines  to  the  margin 
available  under  the  own  resources  ceiling.  Borrowings  related  to  loans  disbursed  under  the  EFSM  are 
guaranteed by the EU budget. It is not foreseen that the EFSM will engage in new financing programmes 
or enter into new loan facility agreements.  

The  BOP  facility,  a  policy-based  financial  instrument,  provides  medium-term  financial  assistance  to 
Member  States  of  the  EU  that  have  not  adopted  the  Euro.  It  enables  the  granting  of  loans  to  Member 
States who are experiencing, or are seriously threatened with, difficulties in their balance of payments or 
capital movements. The maximum outstanding amount of loans granted under the instrument is limited 
to EUR 50 billion. Borrowings related to these BOP loans are guaranteed by the EU budget. 

MFA is a policy-based financial instrument of untied and undesignated balance of payment and/or budget 
support  to  partner  countries  currently  following  an  IMF  programme.  It  takes  the  form  of  medium/long 
term  loans  or  grants  or  an  appropriate  combination  of  both  and  generally  complements  financing 
provided  in  the  context  of  an  IMF-supported  adjustment  and  reform  program.  These  loans  are 
guaranteed by the Guarantee Fund for external actions. At 31 December 2016, EUR 1 313 million relating 
to a loan facility agreement under MFA assistance were granted to Ukraine (EUR 1 200 million), to Tunisia 
(EUR 100 million), to Georgia (EUR 13 million) but not yet disbursed – see note 4.1.2. 

38 

 
 
 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Annual accounts of the European Union 2016 

The Euratom legal entity (represented by the Commission) lends money to both Member States and non-
Member  States  to  finance  projects  relating  to  energy  installations.  At  31 December 2016,  loans  of 
EUR 300 million were granted to Ukraine but not yet disbursed – see note 4.1.2. Guarantees from third-
parties of EUR 252 million (2015: EUR 301 million) have been received covering Euratom loans. 

ECSC in Liquidation loans were granted on borrowed funds in accordance with articles 54 and 56 of the 
ECSC Treaty. 

Loans effective interest rates (expressed as a range of interest rates) 

Macro Financial Assistance (MFA) 
Euratom 
Balance of Payment (BOP) 
European Financial Stability Mechanism (EFSM) 
ECSC in Liquidation 

31.12.2016 
0 % - 4.54 % 
0 % - 5.76 % 
2.37 % - 3.37 % 
0.62 % - 3.75 % 
5.23 % - 5.81 % 

31.12.2015 
0 % - 4.54 % 
0.08 % - 5.76 % 
2.37 % - 3.62 % 
0.62 % - 3.75 % 
5.23 % - 5.81 % 

2.4.3.2.  Other loans 

Loans with special conditions 
Subrogated loans 
ECSC in liquidation housing loans 
Term deposits between 3 and 12 months  
Total 
Non-current 
Current 

31.12.2016 
 93 
– 
 5 
 245 
 343 
 77 
 266 

EUR millions 
31.12.2015 
 113 
– 
 6 
 257 
 377 
 88 
 290 

Nominal value of other loans at 31 December 2016 total EUR 673 million (2015: EUR 609 million). 

Loans with special conditions are granted at preferential rates as part of co-operation with non-Member 
States. 

Subrogated loans are defaulting loans which were granted by the EIB and for which all rights have been 
subrogated to the EU following the payment from the Guarantee Fund for external actions. These loans 
are fully impaired for an amount of EUR 332 million (2015: EUR 218 million). 

Impairment on other loans 

31.12.2015 

Additions 

Reversals 

Write-off  

Other 

Loans with special 
conditions 
Subrogated loans 

ECSC in liquidation 
housing loans 
Total 

 13 

 218 

– 

 231 

0 

114 

– 

114 

 (6) 

0 

– 

 (6) 

0 

0 

– 

0 

0 

0 

– 

0 

EUR millions 
31.12.2016 

 7 

 332 

– 

 339 

39 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Annual accounts of the European Union 2016 

2.5.  PRE-FINANCING 

Non-current pre-financing 
Pre-financing 
Other advances to Member States 
Contribution to Trust Funds 

Current pre-financing 
Pre-financing 
Other advances to Member States 

Total 

Note 

31.12.2016 

31.12.2015 

EUR millions 

2.5.1 
2.5.2 

2.5.1 
2.5.2 

20 219 
1 651 
 31 
21 901 

21 386 
2 183 
23 569 
45 470 

28 543 
1 332 
 4 
29 879 

11 498 
3 779 
15 277 
45 156 

The level of pre-financing amounts in the various programmes must be sufficient to ensure the necessary 
funding for  the beneficiary to start  the project,  while also safeguarding the financial interests of  the EU 
and  taking  into  consideration  legal,  operational  and  cost-effectiveness  constraints.  All  these  elements 
have  been  given  due  consideration  by  the  Commission  in  an  effort  to  improve  the  follow-up  of  pre-
financing.  

2.5.1. 

Pre-financing 

Gross amount 

Cleared via 
cut-off 

Net amount 
at 31.12.2016 

Gross amount 

Cleared via 
cut-off 

EUR millions 
Net amount  
at 31.12.2015 

Shared management 

EAFRD & other 
rural develop-
ment instruments 
ERDF & CF 

ESF 

Other 

Direct Management 

Implemented by:  

Commission 

EU executive 
agencies 
Trust funds 

Indirect Management 

Implemented by: 

Other EU 
agencies & bodies 
Third countries 

International 
organisations 
Other entities 

Total 

Non-current 

Current 

3 955 

– 

3 955 

4 726 

(1 629) 

3 097 

19 858 

6 477 

4 219 

(4 727) 

 (617) 

(2 393) 

15 131 

5 860 

1 826 

24 268 

7 251 

4 359 

(7 416) 

(1 325) 

(2 365) 

34 509 

(7 737) 

26 772 

40 604 

(12 735) 

12 424 

13 136 

(8 843) 

(8 348) 

 142 

 (82) 

25 701 

(17 273) 

 616 

 (157) 

1 861 

7 230 

6 498 

16 206 

76 416 

20 219 

56 197 

(1 135) 

(4 432) 

(4 077) 

(9 801) 

(34 811) 

– 

(34 811) 

3 581 

4 788 

 60 

8 429 

 459 

 726 

2 797 

2 422 

6 404 

41 605 

20 219 

21 386 

12 512 

11 065 

(9 536) 

(7 767) 

 14 

 (5) 

23 591 

(17 308) 

 627 

 (95) 

2 151 

6 640 

5 330 

14 748 

78 943 

28 543 

50 401 

(1 229) 

(4 014) 

(3 521) 

(8 859) 

(38 902) 

– 

(38 902) 

16 852 

5 926 

1 994 

27 869 

2 976 

3 298 

 9 

6 283 

 532 

 922 

2 626 

1 809 

5 889 

40 041 

28 543 

11 498 

Pre-financing  represents  money  paid  out,  and  thus  implementation  of  payment  appropriations.  As 
explained in note 1.5.7, these are advances and so not yet expensed. Thus while pre-financing reduces 
outstanding RAL (see note 5.1) it represents expenses still to be recognised in the statement of financial 
performance. 

The  closure  of  programming  period  2007-2013  and  the  gradual  set-up  of  programs  under  the  period 
2014-2020 are the major factors influencing the amounts on the balance sheet: pre-financing related to 

40 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
Annual accounts of the European Union 2016 

the  old  programs  is  decreasing  due  to  the  acceptance  of  costs,  while  further  pre-financings  have  been 
paid out concerning the new programming period. 

For  shared  management  this  transition  between  programming  periods  also  explains  the  movement 
between  current  and  non-current  balances.  The  programming  period  2007-2013  is  in  its  closing  phase 
and thus more amounts become due within twelve months. Concerning the programming period 2014 - 
2020, the initial pre-financing paid is booked as non-current, while the annual pre-financing is booked as 
current. 

The  table  above  shows  a  significant  decrease  in  the  gross  pre-financing  amounts  under  shared 
management,  which  is  explained  by  the  clearing  of  EUR 18 521 million  of  costs  offset  partially  by  the 
payment of new pre-financing of EUR 12 426 million. 

Guarantees received in respect of pre-financing 

These  are  guarantees  that  the  Commission  requests  from  beneficiaries  that  are  not  Member  States  in 
certain  cases  when  paying  out  advance  payments  (pre-financing).  There  are  two  values  to  disclose  for 
this type of  guarantee,  the “nominal”  and  the “on-going” values.  For the nominal  value, the generating 
event  is  linked  to  the  existence  of  the  guarantee.  For  the  on-going  value,  the  guarantee’s  generating 
event is the pre-financing payment and/or subsequent clearings. At 31 December 2016 the nominal value 
of guarantees received in respect of pre-financing amounted to EUR 683 million while the on-going value 
of those guarantees was EUR 496 million (2015: EUR 844 million and EUR 626 million respectively). 

Certain pre-financing amounts paid out under the 7th Research Framework Programme for research and 
technological  development  (FP7)  and  under  Horizon  2020  are  effectively  covered  by  a  Participants 
Guarantee Fund (PGF). The PGF is a mutual benefit instrument set up to cover the risks relating to non-
payment  of  amounts  by  the  beneficiaries  during  the  implementation  of  the  indirect  actions  of  FP7  and 
Horizon 2020. All participants of indirect actions receiving a grant from the EU contribute 5 % of the total 
amount received to the PGF's capital. 

At  31 December 2016  pre-financing  amounts  covered  by  the  PGF  totalled  EUR 1.8 billion  (2015: 
EUR 1.7 billion). The EU (represented by the Commission) acts as an executive agent of the participants 
of the PGF, but the fund is owned by the participants. 

At year-end, the PGF had total assets of EUR 1 951 million (2015: EUR 1 838 million). The assets of the 
PGF also include financial assets that are managed by the Directorate-General for Economic and Financial 
Affairs of the Commission. As the PGF is a separate entity the assets of the fund are not consolidated in 
these EU annual accounts. 

2.5.2.  Other advances to Member States 

Advances to Member States for financial instruments  
under shared management 
Aid Schemes 
Total 
Non-current 
Current 

31.12.2016 
2 534 

EUR millions 
31.12.2015 
3 287 

1 300 
3 834 
1 651 
2 183 

1 824 
5 111 
1 332 
3 779 

Advances to Member States for financial instruments under shared management 

Under the framework of the European Structural and Investment Funds (ESIF) programmes, it is possible 
to make advance payments from the EU budget to Member States so as to allow them to contribute to 
financial instruments (i.e. loans, equity investments or guarantees). These financial instruments are set 
up  and  managed  under  the  responsibility  of  the  Member  States,  not  the  Commission.  Nevertheless, 
monies  that  are  unused  by  these  instruments  at  year-end  are  the  property  of  the  EU  (as  with  all  pre-
financing) and are thus treated as an asset on the EU’s balance sheet. 

41 

 
 
 
 
 
 
 
2014-2020 Period: 

Annual accounts of the European Union 2016 

Under cohesion policy the Member States have contributed an amount of EUR 3 681 million, of which it is 
estimated  that  EUR 1 842 million  was  still  to  be  implemented  at  31  December  2016.  This  includes  the 
contribution  of  the  Member  States  to  the  SME  Initiative,  an  instrument  aimed  at  stimulating  additional 
lending by the banking sector to SMEs (EUR 745 million paid, out of which EUR 481 million is estimated 
as not yet implemented). 

For rural development, EUR 6 million remained unused at year-end. 

2007-2013 Period:  

In  the  previous  programming  period,  the  basic  legal  acts  do  not  oblige  the  Member  States  to  provide 
periodic reports to the Commission on the use of these advances, and in some cases not even to identify 
them in the statements of expenditure submitted to the Commission.  

For  cohesion  policy,  every  year  the  Commission  collects  information  from  the  Member  States  on  these 
financial instruments and consolidates it in an annual implementation report. The next report will be the 
final  implementation  report  but  this  report  will  not  be  available  in  time  for  inclusion  in  these  accounts. 
Consequently,  and  consistent  with  previous  years,  the  measurement  is  estimated  on  the  basis  of  the 
most recent reliable information available, i.e. the annual implementation report as at 31 December 2015 
and disbursements made during 2016. The estimate also relies on the assumption that funds will be used 
in  full  and  used  evenly  over  the  remaining  period  of  operation  (ending  31 March 2017).  It  is  estimated 
that  at  year-end  2016  an  amount  of  EUR 686 million  was  still  to  be  used  for  investments  in  final 
beneficiaries.  

For  rural  development,  at  year-end,  all  amounts  have  been  implemented  or  re-allocated  to  other 
measures before the end of the programming period. 

Aid Schemes 

Similar  to  the  above,  advances  paid  by  the  Member  States  for  various  aid  schemes  (state  aid,  market 
measures  of  EAGF  or  investment  measures  of  EAFRD)  that  were  not  used  at  year-end  are  recorded  as 
assets on the EU's balance sheet. The Commission has estimated the value  of these advances based on 
information provided by the Member States; the resulting amounts are included under the Aid Schemes 
sub-heading above. 

2014-2020 Period: 

For cohesion policy, EUR 117 million was unused at year-end. 

For  agriculture  policy,  the  Commission  requested  information  on  the  unused  amounts  directly  from  the 
paying  agencies  in  the  Member  States.  On  the  basis  of  this  information,  it  is  estimated  that 
EUR 721 million remained unused at year-end. 

2007-2013 Period: 

It is estimated that EUR 461 million representing  advances  paid in  the context of  the agricultural policy 
remained unused at the end of 2016. 

42 

 
Annual accounts of the European Union 2016 

2.6.  EXCHANGE RECEIVABLES AND NON-EXCHANGE 

RECOVERABLES 

Note 

31.12.2016 

31.12.2015 

EUR millions 

Non-current 
Recoverables from non-exchange transactions 
Receivables from exchange transactions 

Current 
Recoverables from non-exchange transactions 
Receivables from exchange transactions 

2.6.1 
2.6.2 

2.6.1 
2.6.2 

Total 

2.6.1.  Recoverables from non-exchange transactions 

 700 
 16 
 717 

10 347 
 558 
10 905 
11 621 

 857 
 13 
 870 

8 882 
 572 
9 454 
10 324 

Note 

31.12.2016 

31.12.2015 

EUR millions 

Non-current 
Member States 

Current 
Member States 
Fines 
Accrued income and deferred charges 
Other recoverables 

Total 

2.6.1.1.  Recoverables from Member States 

2.6.1.1 

2.6.1.1 
2.6.1.2 
2.6.1.3 

 700 

 700 

8 162 
1 808 
 329 
 47 

10 347 

11 047 

TOR established in the A account 
TOR established in the separate account 
Own resources to be received 
Impairment 
Other 
Own resources recoverables 
European Agricultural Guarantee Fund (EAGF) 
European Agricultural Fund for Rural Development (EAFRD) 
Temporary Rural Development Instrument (TRDI) 
Special Accession Programme for Agriculture and Rural 
Development (SAPARD) 
Impairment 
EAGF and rural development recoverables 
Pre-financing recovery expected 
VAT paid and recoverable 
Other recoverables from Member States 
Total 
Non-current 
Current 

31.12.2016 
3 261 
1 437 
1 764 
 (753) 
 36 
5 745 
2 606 
 924 
 30 
 167 

 (999) 
2 729 
 293 
 41 
 55 
8 863 
 700 
8 162 

 857 

 857 

6 845 
1 601 
 369 
 67 

8 882 

9 739 

EUR millions 
31.12.2015 
3 041 
1 283 
- 
 (760) 
 10 
3 573 
3 846 
 750 
 26 
 175 

(1 092) 
3 705 
 313 
 36 
 75 
7 701 
 857 
6 845 

The non-current amounts due from Member States relate to non-executed conformity clearance decisions 
for  the  European  Agricultural  Guarantee  Fund  (EAGF)  and  the  European  Agricultural  Fund  for  Rural 
Development (EAFRD) to be implemented in annual instalments and/or deferrals. 

43 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Own resources recoverables 

Annual accounts of the European Union 2016 

Traditional own resources (TOR), composed of customs duties and sugar levies, are collected by Member 
States on behalf of the Commission. Member States establish TOR and communicate the amounts of the 
entitlements  established  to  the  Commission  by  means  of  monthly  'A  account'  statements.  Established 
entitlements that have not been included in the 'A accounts', because they have not been recovered by 
Member  States  and  no  security  has  been  provided  (or  if  security  has  been  provided  but  are  anyway 
contested), are shown in the 'separate account'. 

The Member States’ contribution based on VAT and GNI is subject to an annual adjustment which takes 
place every year on the first working day of December. The own resources to be received included also 
the adjustments for the financial years 2014, 2015 and 2016 related to the new provisions introduced by 
the  Own  Resources  Decision  (ORD)  2014  following  the  completion  of  the  ratification  process  and  the 
entry into force on 1 October 2016, which were due for payment by Member States on 1 January 2017. 

Corrections may still be made to the actual VAT and GNI bases during the subsequent four years, unless 
a reservation is issued. These reservations have to be seen as potential claims on the Member States for 
uncertain amounts as their financial impact cannot be estimated with accuracy. When the exact amount 
can be determined, the corresponding VAT and GNI-based resources are called either in connection with 
VAT and GNI balances or by individual calls for funds. 

EAGF and Rural Development recoverables 

This item primarily covers the amounts owed by Member States at 31 December 2016, as declared and 
certified  by  the  Member  States  at  15  October  2016.  An  estimation is  made  for  the  recoverables  arising 
after this declaration and up to 31 December 2016. The Commission also estimates a write-down for the 
amounts  owed  by  beneficiaries  that  are  unlikely  to  be  recovered.  The  fact  that  such  an  adjustment  is 
made does not mean  that the Commission is waiving future recovery of  these amounts.  A  deduction of 
20 % is also included in the adjustment, and corresponds to what Member States are allowed to retain to 
cover administrative costs. 

2.6.1.2.  Fines 

This  refers  to  fines  issued  by  the  Commission  which  were  not  (provisionally)  cashed  at  year  end 
(EUR 1 986 million) less amounts written-down (EUR 178 million). Guarantees totalling EUR 1 012 million 
were  received  for  the  fines  outstanding  at  year-end  (2015:  EUR 1 428 million).  It  should  be  noted  that 
EUR 651 million of these receivables were due for payment after 31 December 2016. 

2.6.1.3.  Accrued income and deferred charges 

Cohesion, agriculture and rural development funds: 
Financial corrections 
Other accrued income 
Deferred charges relating to non-exchange transactions 
Total 
Non-current 
Current 

31.12.2016 
 9 

EUR millions 
31.12.2015 
 10 

 64 
 256 
 329 
– 
 329 

 162 
 196 
 369 
– 
 369 

44 

 
 
 
 
2.6.2.  Receivables from exchange transactions 

Annual accounts of the European Union 2016 

Non-current 
Other receivables 

Current 
Customers 
Impairment on receivables from customers 
Deferred charges relating to exchange transactions 
Other 

Total 

31.12.2016 

EUR millions 
31.12.2015 

 16 
 16 

 246 
 (128) 
 250 
 191 
 558 
 574 

 13 
 13 

 225 
 (107) 
 228 
 227 
 572 
 585 

The  impairment  on  receivables  from  customers  disclosed  above  includes  EUR 55 million  of  impairment 
determined on an individual basis. 

2.7.  INVENTORIES 

Scientific materials 
Other 
Total 

31.12.2016 
 54 
 111 
 165 

EUR millions 
31.12.2015 
 55 
 83 
 138 

2.8.  CASH AND CASH EQUIVALENTS 

Accounts with Treasuries and Central Banks 
Current accounts 
Imprest accounts 
Transfers (cash in transit) 
Other term deposits 

Bank accounts for budget implementation and 
other term deposits 
Cash belonging to financial instruments 

Cash relating to fines 

Cash relating to other institutions, agencies  
and bodies 
Cash relating to trust funds 
Total 

Note 

2.8.1 

2.8.2 

2.8.3 

31.12.2016 
24 566 
 127 
 5 
– 
– 

EUR millions 

31.12.2015 
17 119 
 110 
 4 
– 
 28 

24 698 

17 262 

1 390 

1 325 

1 006 

 167 
28 585 

1 298 

1 908 

1 012 

 192 
21 671 

2.8.1.  Bank accounts for budget implementation and other term deposits 

This  heading  covers  the  funds  which  the  Commission  keeps  in  its  bank  accounts  in  each  Member  State 
and  EFTA  country  (treasury  or  central  bank),  as  well  as  in  commercial  bank  current  accounts,  imprest 
accounts  and  petty  cash.  The  exceptionally  high  treasury  balance  at  the  end  of  2016  is  due  to  the 
following main elements: 

  As regards own resources, the end of year balance includes a total net amount of EUR 7.7 billion 
to  be  returned  to  Member  States  in  early  2017  as  result  of  amending  budgets  adopted  late  in 
2016. In addition, advances on own resources amounting to EUR 1.5 billion were received in the 
final days of 2016. 

45 

 
 
 
 
 
 
 
 
 
 
 
 
  
 
 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Annual accounts of the European Union 2016 

  A  significant  amount  of  fines  imposed  by  the  Commission  for  breach  of  competition  rules  of 
EUR 4.3 billion were definitively cashed in 2016 and are part of the year-end treasury balance. 

 

The  treasury  balance  also  includes  the  assigned  revenue  and  payment  appropriations  not  spent 
by the end of 2016 of EUR 11 billion. 

2.8.2.  Cash belonging to financial instruments 

Amounts shown under this heading primarily concern cash equivalents managed by fiduciaries on behalf 
of  the  Commission  for  the  purpose  of  implementing  particular  financial  instrument  programmes  funded 
by the EU budget (see note 2.4.1). The cash belonging to financial instruments can only be used in the 
programme concerned. 

2.8.3.  Cash relating to fines 

This is cash received in connection with fines issued by the Commission for which the case is still open. 
These amounts are kept in specific deposit accounts that are not used for any other activities. Where an 
appeal  has  been  lodged  or  where  it  is  unknown  if  an  appeal  will  be  made  by  the  other  party,  the 
underlying amount is shown as contingent liability in note 4.1.4. 

The  decrease  in  this  balance  is  due  to  the  fact  that  since  2010,  all  new  provisionally  cashed  fines  are 
managed  by  the  Commission  in  the  BUFI  fund  and  invested  in  financial  instruments  categorised  as 
available for sale (see note 2.4.1). 

46 

 
 
Annual accounts of the European Union 2016 

LIABILITIES 

2.9.  PENSION AND OTHER EMPLOYEE BENEFITS 

Net employee benefit scheme liability 

Pension 
Scheme 
of 
European 
Officials 
58 746 
N/A 
58 746 

Other 
retirement 
benefit 
schemes 

Joint 
Sickness 
Insurance 
Scheme 

31.12.2016  
Total 

EUR millions 
31.12.2015  
Total 

1 882 
 (139) 
1 743 

7 036 
 (293) 
6 742 

67 664 
 (432) 
67 231 

64 242 
 (428) 
63 814 

Defined Benefit Obligation 
Plan assets 
Net liability 

The increase in the total  employee benefits liability is primarily due to an increase in the net liability of 
the  Pension  Scheme  of  European  Officials.  This  increase  is  mainly  due  to  the  reduction  in  the  real 
discount  rate  from  0.6 %  to  0.3 %,  together  with  the  fact  that  additional  rights  gained  by  scheme 
members exceeded benefit payments out of the scheme. 

2.9.1. 

Pension Scheme of European Officials 

This defined benefit obligation represents the present value of expected future payments  that the EU is 
required  to  make  so  as  to  settle  the  pension  obligations  resulting  from  employee  service  in  the  current 
and  prior  periods.  The  scheme  is  ongoing,  and  as  such,  all  payments  required  to  be  made  from  the 
scheme on an annual basis are included in the EU budget each year. 

In  accordance  with  Article  83  of  the  Staff  Regulations,  the  payment  of  the  benefits  provided  for  in  the 
staff pension scheme constitutes a charge to the EU's budget. The scheme is unfunded, but the Member 
States  guarantee  the  payment  of  these  benefits  collectively.  A  compulsory  pension  contribution  is 
deducted from the basic salaries of active members, currently 9.8 %. These contributions are treated as 
budget revenue of the year and contribute to the funding of EU expenditure in general, see also note 3.6. 

The liabilities of the pension scheme were assessed on the basis of the number of staff and retired staff 
at 31 December 2016 and on the rules of the Staff Regulations applicable at this date. This valuation was 
carried out in accordance with the methodology of IPSAS 25 (and therefore also EU accounting rule 12). 
During 2016, the Commission has taken steps to strengthen the processes and the reliability of the basic 
data collection used for calculating the employee benefits liability. The work will continue during 2017  – 
possible results, where appropriate, will be reflected in the 2017 accounts. 

2.9.2.  Other retirement benefit schemes 

This refers to the liability relating to the pension obligations towards Members and former Members of the 
Commission, the Court of Justice (and General Court) and the Court of Auditors, the Secretaries General 
of the Council, the Ombudsman, the European Data Protection Supervisor, and the European Union Civil 
Service Tribunal. Also included under this heading is a liability relating to the pensions of Members of the 
European Parliament. 

2.9.3. 

Joint Sickness Insurance Scheme 

In addition to the above retirement benefit schemes, a valuation is made for the estimated liability that 
the EU has regarding the Joint Sickness Insurance Scheme in relation to healthcare costs which must be 
paid during employees' post-activity periods (net of their contributions).  

47 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Movement in present value of employee benefits defined benefit obligation 

Annual accounts of the European Union 2016 

The present value of the defined benefit obligation is the discounted, without deducting any plan assets, 
expected future payments required to settle the obligation resulting from employee service in the current 
and prior periods.  

An analysis of the current year movement in the defined benefit obligation is shown below: 

Pension 
Scheme of 
European 
Officials  

54 967 

Other 
retirement 
benefit 
schemes 
1 613 

2 267 
1 264 
2 142 
– 
(1 330) 
 (565) 

 83 
 29 
 148 
– 
 (44) 
 52 

EUR millions 

Total 

Joint Sickness 
Insurance 
Scheme 

7 662 

64 242 

 283 
 161 
(1 039) 
 24 
 (55) 
– 

2 634 
1 454 
1 251 
 24 
(1 429) 
 (513) 

58 746 

1 882 

7 036 

67 664 

Present value as at 
31.12.2015 
Current Service Cost 
Interest cost 
Net Actuarial (gains) and losses 
Contributions from members 
Benefits paid 
Liability increase/(decrease) due 
to taxes on pensions 
Present value as at 
31.12.2016 

Current service costs are the increase in the present value of the defined benefit obligation arising from 
current members' service in the current period.  

Interest  costs  are  the  increase  during  the  period  in  the  present  value  of  the  defined  benefit  obligation 
because the benefits are one period closer to settlement.  

Net Actuarial gains and losses comprise: 

- 

- 

Experience  adjustments  (the  effects  of  differences  between  the  previous  actuarial  assumptions 
for 2016 and what has actually occurred in 2016); and 

Effects of changes in actuarial assumptions, either financial (such as projected salary increases) 
or  demographic  (such  as  mortality  rates).  These  assumptions  are  inherently  uncertain  and 
therefore can show significant movements from year to year. 

Benefits  are  paid  during  the  year  according  to  the  rules  of  the  scheme.  These  benefits  paid  lead  to  a 
decrease in the defined benefit obligation as they are no longer to be paid in the future. 

Actuarial assumptions - employee benefits 

The principle actuarial assumptions used in  the valuation of  the two  main  employee benefit schemes of 
the EU are shown below: 

2016 
Nominal discount rate  
Expected inflation rate  
Real discount rate 
Expected rate of salary increases 
Medical cost trend rates 
Retirement age 
2015 
Nominal discount rate  
Expected inflation rate  
Real discount rate 
Expected rate of salary increases 
Medical cost trend rates 
Retirement age 

Pension Scheme 
of European 
Officials 

Joint Sickness 
Insurance 
Scheme 

1.7 % 
1.4 % 
0.3 % 
1.2 % 
N/A 
63/64/66 

2.0 % 
1.4 % 
0.6 % 
1.2 % 
N/A 
63/64/65 

1.9 % 
1.5 % 
0.4 % 
1.1 % 
3.0 % 
63/64/66 

2.1 % 
1.4 % 
0.7 % 
1.2 % 
3.0 % 
63/64/66 

48 

 
 
  
 
 
 
 
 
 
  
 
 
 
 
 
 
 
 
 
Mortality rates are based on the International Civil Servants Life Table (ICSLT 2013). 

Annual accounts of the European Union 2016 

The nominal discount rate is determined as the value of the Euro zero-coupon yield (with a maturity of 
21 years as of December 2016 for the Pension Scheme of European Officials (PSEO), and 26 years for the 
Joint  Sickness  Insurance  Scheme).  The  inflation  rate  used  is  the  expected  inflation  rate  over  the 
equivalent period. It must be determined empirically, based on prospective values as expressed by index-
linked  bonds  on  the  European  financial  markets.  The  real  discount  rate  is  calculated  from  the  nominal 
discount rate and the expected long-term inflation rate. 

Movement in present value of plan assets 

Other retirement 
benefit schemes 
149 

Joint Sickness 
Insurance Scheme 
280 

 (10) 
 139 

 14 
 293 

Present value as at 
31.12.2015 
Net movement in plan assets 
Present value as at 
31.12.2016 

5 year trend 

Employee benefits liability 

2012 
42 503 

2013 
46 818 

2014 
58 616 

2015 
63 814 

EUR millions 

Total 

 428 

 4 
 432 

EUR millions 
2016 
67 231 

The significant increase in the employee benefits liability over the five years can largely be explained by a 
reduction in the real discount rate used to discount the future cash flows. This reduction is linked to the 
underlying  economic  conditions,  particularly  the  fall  in  interest  rates.  For  the  main  PSEO  scheme,  for 
example, the real discount rate fell from 1.6 % at the end of 2012 to 0.3 % at the end of 2016. 

Amounts recognised in the Statement of Financial Performance 

2016 
Current service cost 
Interest cost 
Past service cost 
Change in plan assets 
Staff and pension costs 
Actuarial gains and losses 
Total  

Pension 
Scheme of 
European 
Officials 

Other 
retirement 
benefit 
schemes 

Joint 
Sickness 
Insurance 
Scheme 

EUR millions 

Total 

2 042 
1 138 
– 
– 
3 180 
1 929 
5 108 

 97 
 33 
– 
 (7) 
 124 
 179 
 302 

 283 
 161 
– 
 (45) 
 399 
(1 039) 
 (640) 

2 422 
1 332 
– 
 (52) 
3 702 
1 068 
4 770 

Joint Sickness Insurance Scheme sensitivity 

A one percentage point change in assumed medical cost trend rates would have the following effects: 

The aggregate of the current service cost and interest cost 
components of net periodic post-employment medical costs 
The accumulated post-employment benefit obligation for 
medical costs 

One percentage 
point increase 
 89 

EUR millions 
One percentage 
point decrease 
 (74) 

2 201 

(1 828) 

49 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
 
 
 
 
 
Annual accounts of the European Union 2016 

2.10.  PROVISIONS 

Amount at 
31.12.2015 

Additional 
provisions 

Unused 
amounts 
reversed 

Amounts 
used 

Transfer 
between 
categories 

EUR millions 

Change in 
estimation 

Amount at 
31.12.2016 

– 
– 
 459 
1 078 

 411 
 4 
 79 
2 030 
1 716 

 314 

 40 
 19 
 8 
– 

 536 
 20 
 24 
 647 
 491 

 156 

 (21) 
– 
 (2) 
– 

 (7) 
– 
 9 
 (21) 
 (22) 

 0 
– 
 (33) 
 (29) 

 (53) 
– 
 (23) 
 (138) 
 (9) 

 129 
 198 
 (327) 
– 

– 
– 
– 
– 
 (304) 

 1 

 (128) 

 304 

– 
– 
 (2) 
 64 

 (6) 
– 
 38 
 94 
 65 

 29 

 149 
 217 
 102 
1 113 

 880 
 23 
 127 
2 611 
1 936 

 675 

Legal cases: 
  Agriculture 
  Cohesion 
  Other 
Nuclear site 
dismantling 
Financial 
Fines 
Other 
Total 
Non-current 

Current 

Provisions are amounts, arising from past events, that will probably have to be paid by the EU budget in 
the future. 

Legal cases 

This is the estimate of amounts that will probably have to be paid out after the year-end in relation to a 
number of on-going legal cases. 

Nuclear site dismantlement 

In  2014  the  basis  for  the  provision  was  updated  as  per  the  "2014  updated  JRC  Strategy  on 
Decommissioning and Waste Management" (D&WM). It represents the follow up of the comments raised 
by  the Review of  the JRC D&WM programme  made by  external experts  in  2012.  In accordance with EU 
accounting rules, this provision is indexed for inflation and then discounted to its net present value (using 
the  Euro  zero-coupon  swap  curve).  At  31 December 2016,  this  resulted 
in  a  provision  of 
EUR 1 113 million,  split between  amounts expected to  be used  in  2016  (EUR 27 million) and  afterwards 
(EUR 1 086 million). 

In  view  of  the  estimated  duration  of  this  programme  (around  20  years),  it  should  be  pointed  out  that 
there  is  some  uncertainty  about  this  estimate,  and  the  final  cost  could  be  different  from  the  amounts 
currently recorded. 

Financial provisions 

These concern mainly provisions which represent the estimated losses that will be incurred in relation to 
the guarantees given by the different financial instruments, where the EIF and the EIB are empowered to 
issue guarantees in their own name but on behalf of and at the risk of the EU. The financial risk of the EU 
linked to the guarantees is, however, capped. Non-current financial provisions are discounted to their net 
present value (using the Euro Swap annual rate). 

The increase in financial provisions relates mainly to additional provisions for outstanding loans to Syria 
guaranteed  under  the  EIB  external lending  mandate  guarantee  and  to  increased  activities  under  H2020 
and COSME guarantee instruments. 

50 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
Annual accounts of the European Union 2016 

2.11.  FINANCIAL LIABILITIES 

Non-current financial liabilities 
Financial liabilities at amortised cost 
Financial liabilities at fair value  
through surplus or deficit 
Financial guarantee liabilities 

Current financial liabilities 
Financial liabilities at amortised cost 
Financial liabilities at fair value  
through surplus or deficit 
Financial guarantee liabilities 

Total 

2.11.1.  Financial liabilities at amortised cost  

Borrowings for financial assistance 
Other financial liabilities 

Total 

Non-Current 
Current 

2.11.1.1.  Borrowings for financial assistance 

Note 

31.12.2016 

31.12.2015 

EUR millions 

2.11.1 
2.11.2 

2.11.3 

2.11.1 
2.11.2 

2.11.3 

55 067 
– 

– 
55 067 

2 283 
 1 

– 
2 284 
57 351 

51 764 
– 

– 
51 764 

7 939 
– 

– 
7 939 
59 703 

Note 
2.11.1.1 
2.11.1.2 

31.12.2016 
55 128 
2 222 

57 350 

55 067 
2 283 

EUR millions 

31.12.2015 
56 860 
2 842 

59 703 

51 764 
7 939 

EFSM 

BOP 

MFA 

Euratom 

ECSC in 

Total at 31.12.2015 
New borrowings 
Repayments 
Exchange differences 
Changes in carrying amounts 
Total at 31.12.2016 
Non-current 
Current 

47 509 
4 750 
(4 750) 
– 
 (53) 
47 456 
46 800 
 656 

5 811 
– 
(1 500) 
– 
 (40) 
4 272 
3 050 
1 222 

3 024 
 10 
 (70) 
– 
– 
2 964 
2 889 
 75 

Liquid-     
dation 
 215 
– 
– 
 (30) 
 (1) 
 184 
 96 
 88 

 301 
– 
 (49) 
– 
– 
 252 
 199 
 53 

EUR millions 
Total 

56 860 
4 760 
(6 369) 
 (30) 
 (94) 
55 128 
53 034 
2 094 

Borrowings  mainly  include  debts  evidenced  by  certificates  amounting  to  EUR 54 951 million  (2015: 
EUR 56 656 million). The changes in carrying amount correspond to the change in accrued interests. 

Aside from ECSC in liquidation, the repayment of the above borrowings are ultimately guaranteed by the 
EU budget – see note 4.1.2, and by extension each Member State. 

51 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Borrowings effective interest rates (expressed as a range of interest rates) 

Annual accounts of the European Union 2016 

Macro Financial Assistance (MFA) 
Euratom 
Balance of Payment (BOP) 
European Financial Stability Mechanism (EFSM) 
ECSC in Liquidation 

31.12.2016 
0 % - 4.54 % 
0 % - 5.68 % 
2.37 % - 3.37 % 
0.62 % - 3.75 % 
6.92 % - 9.78 % 

31.12.2015 
0 % - 4.54 % 
0 % - 5.67 % 
2.37 % - 3.62 % 
0.62 % - 3.75 % 
6.92 % - 9.78 % 

2.11.1.2.  Other financial liabilities 

Non-current 
Finance lease liabilities 
Buildings paid for in instalments 
Other 

Current 
Fines to be reimbursed 
Finance lease liabilities 
Buildings paid for in instalments 
Other 

Total 

Finance lease liabilities 

31.12.2016 

EUR millions 
31.12.2015 

1 545 
 329 
 160 
2 034 

 25 
 84 
 22 
 58 
 189 
2 222 

1 648 
 352 
 122 
2 122 

 625 
 75 
 21 
 (0) 
 721 
2 842 

EUR millions 

Total 
Liability 
1 619 
 10 
1 629 
 645 
2 274 

Description 

< 1 year 

Future amounts to be paid 
> 5 years 

1-5 years 

Land and buildings 
Other tangible assets 
Total at 31.12.2016 
Interest element 
Total future minimum lease 
payments at 31.12.2016 
Total future minimum lease payments  
at 31.12.2015 

 80 
 4 
 84 
 72 
 156 

 132 

 403 
 6 
 409 
 269 
 678 

 658 

1 136 
– 
1 136 
 304 
1 439 

1 608 

2 396 

The lease and building related amounts above will have to be funded by future budgets. 

2.11.2.  Financial liabilities at fair value through surplus or deficit  

31.12.2016 

Notional 
amount 
receive leg 

 99 

Notional 
amount  
pay leg 
 (101) 

Fair value 

 1 

Notional 
amount 
receive leg 

– 

31.12.2015 

Notional 
amount  
pay leg 

– 

EUR millions 

Fair value 

– 

Foreign currency 
forward contract 

Financial  liabilities  at  fair  value  through  surplus  or  deficit  at  31  December  2016  relate  to  a  foreign 
currency  forward  contract  in  which  the  EU  entered  into  in  2016  in  order  to  hedge  foreign  currency  risk 
related to USD denominated debt securities held in the EFSI Guarantee Fund – see note 2.4.2.  

At  31  December  2016  all  financial  liabilities  at  fair  value  through  surplus  or  deficit  are  categorised  into 
level 2 of the fair value hierarchy (valuation based on observable inputs other than quoted prices). 

52 

 
 
 
  
 
 
 
 
 
 
 
 
 
  
 
 
 
 
 
  
  
 
 
 
 
 
 
 
 
 
2.11.3.  Financial guarantee liabilities 

Annual accounts of the European Union 2016 

The  financial  guarantee  liability  relates  to  the  guarantee  given  under  EFSI.  At  31 December 2016  the 
EFSI  financial  guarantee  liability  total  EUR  zero,  as  the  revenues  to  be  received  under  the  guarantee 
exceed expected losses (see note 4.1.1). 

2.12.  PAYABLES 

Gross Amount 

Adjust- 
ments* 

Net Amount 
at 31.12.2016 

Gross Amount 

Adjust- 
ments* 

EUR millions 
Net Amount  
at 31.12.2015 

Cost claims and 
invoices 
received from: 
Member States: 

EAFRD & other 
rural develop-
ment instruments 
ERDF & CF 

ESF 

Other 

Private and public 
entities 
Total costs 
claims & 
invoices 
received 
EAGF 

Own Resources 
Payables 
Sundry 
Payables 
Other 

 500 

 (34) 

 467 

2 621 

 (230) 

2 391 

10 663 

4 145 

 793 

1 677 

 (793) 

 (95) 

 (47) 

 (169) 

9 871 

4 050 

 747 

1 507 

8 361 

3 355 

 434 

1 928 

 (950) 

 (2) 

 (102) 

 (223) 

7 411 

3 353 

 332 

1 705 

17 779 

(1 138) 

16 641 

16 699 

(1 507) 

15 192 

12 193 

10 441 

 364 

 364 

N/A 

N/A 

N/A 

N/A 

12 193 

10 441 

 364 

 364 

40 005 

6 851 

9 506 

 356 

 286 

N/A 

N/A 

N/A 

N/A 

33 698 

(1 507) 

6 851 

9 506 

 356 

 286 

32 191 

Total 

41 142 

(1 138) 

* Estimated non-eligible amounts and pending other advances to Member States. 

Payables  include  cost  statements  received  by  the  Commission  under  the  framework  of  grant  activities. 
They  are  credited  for  the  amount  being  claimed  from  the  moment  the  demand  is  received.  If  the 
counterpart  is  a  Member  State,  they  are  classified  as  such.  It  is  the  same  procedure  for  invoices  and 
credit  notes  received  under  procurement  activities.  The  cost  claims  concerned  have  been  taken  into 
account  through  the  year-end  cut-off  procedures.  Following  these  cut-off  entries,  estimated  eligible 
amounts have therefore been recorded in the accounts as expenses, while the remaining part is disclosed 
as “Estimated non-eligible amounts and pending other advances to Member States” (see below).  

Almost  all  of  the  cost  claims  are  included  in  the  budgetary  RAL  figure  at  year-end:  all  Member  States 
amounts and a large portion of other entity invoices. 

The  biggest  movement  concerns  the  European  Agricultural  Guarantee  Fund  and  is  due  to  a  better 
implementation of the payments at the Member States level in 2016 compared to 2015 – this meant that 
actual  claims  were  submitted  and  did  not  need  to  be  estimated  at  year-end.  The  increase  of 
EUR 5.3 billion is, therefore, counter-balanced by a similar decrease in accruals - see note 2.13. 

The significant decrease in payables under EAFRD is due primarily to a reduction in the claims received 
for the period 2007-2013 which is in the advanced stages of closure. 

The  other  major  increase  in  payables  concerns  cohesion  policy  (EUR 13.9 billion  in  2016  compared  to 
EUR 10.8 billion  in  2015)  and  mostly  relates  to  the  previous  programming  period,  2007-2013.  The  cost 
statements  submitted  in  relation  to  the  programming  period  2014-2020  remain  limited,  for  several 
reasons e.g. the non-designation of several managing authorities. 

In  the  2014-2020  programming  period,  the  Common  Provisions  Regulation  applicable  to  the  Structural 
Funds (ERDF and ESF), Cohesion Fund and to the European Maritime and Fisheries Fund (EMFF) foresees 

53 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Annual accounts of the European Union 2016 

that  the  EU  budget  is  protected  by  means  of  a  systematic  retention  of  10 %  of  the  interim  payments 
made.  By  February  following  the  end  of  the  accounting  year  (1  July  -  30  June),  the  control  cycle  is 
complete  both  through  management  verifications  by  the  managing  authorities  and  audits  by  the  audit 
authorities.  The  Commission  examines  the  assurance  documents  and  the  accounts  provided  by  the 
relevant authorities in the Member States. The payment / recovery of the final balance is made only after 
this  assessment  is  finalised  and  the  accounts  are  accepted.  The  amount  retained  according  to  this 
disposition at end 2016 totalled EUR 1 billion. 

Own resources payables refer to the contribution of Member States to the EU budget to be reimbursed at 
year-end following the 4th and 5th amending budget of 2016. The significant amount is due to the late 
adoption  of  amending  budget  4  and  5/2016  which  were  based  on  the  own  resource  regulation  and  the 
adjustments related to the new provisions introduced by the new own resources decision 2014 only paid 
to Member States in January 2017. 

Estimated non-eligible amounts and pending other advances to Member States 

Payables are reduced by that part of the requests for reimbursement received, but not yet checked, that 
was estimated to be non-eligible. The largest amounts concern the Structural Actions DGs. Payables are 
also reduced by the part of requests for reimbursement received  concerning other advances to Member 
States (see note 2.5.2) still to pay at year end (EUR 395 million).  

Requests for pre-financing 

In addition to the above amounts, EUR 594 million of requests for pre-financing have been received and 
were not yet paid at year-end. According to the EU accounting rules, these amounts are not booked as 
payables. 

2.13.  ACCRUED CHARGES AND DEFERRED INCOME 

Accrued charges 
Deferred income 
Other 
Total 

The split of accrued charges is as follows: 

EAGF 
EAFRD and other rural development instruments 
ERDF and CF 
ESF 
Other 
Total 

31.12.2016 
66 800 
 638 
 143 
67 580 

31.12.2016 
33 033 
17 024 
7 157 
3 473 
6 112 
66 800 

EUR millions 
31.12.2015 
67 358 
 869 
 175 
68 402 

EUR millions 
31.12.2015 
38 263 
14 806 
5 026 
2 636 
6 627 
67 358 

The biggest movement concerns the European Agricultural Guarantee Fund (EAGF) and is due to a better 
implementation in 2016 of the payments at the Member States level compared to 2015 – this meant that 
actual  claims  were  submitted  and  did  not  need  to  be  estimated  at  year-end.  The  decrease  of 
EUR 5.2 billion is, therefore, counter-balanced by a similar increase in payables - see note 2.12. 

The increase of EUR 3 billion in cohesion is due to increasing implementation at final beneficiaries level. 

The increase in accruals concerning EAFRD (EUR 2.2 billion) is linked to a lower level of claims received 
for the 2014-2020 period meaning that more amounts had to be accrued at year-end. 

Aside from EAGF, all other Member State accruals are included in the budgetary RAL, as are most of the 
'other' accruals – see note 5.1. 

54 

 
 
 
 
 
 
 
 
 
 
 
Annual accounts of the European Union 2016 

Note 
2.14.1 
2.14.2 
2.14.3 

31.12.2016 
 325 
2 643 
1 873 
4 841 

EUR millions 

31.12.2015 
 292 
2 561 
1 829 
4 682 

NET ASSETS 

2.14.  RESERVES 

Fair value reserve 
Guarantee Fund reserve 
Other reserves 
Total 

2.14.1.  Fair value reserve 

In  accordance  with  the  EU  accounting  rules,  the  adjustment  to  fair  value  of  available  for  sale  financial 
assets is accounted for through the fair value reserve. 

Movements of the fair value reserve during the period 

Available for sale financial assets: 
Included in fair value reserve 
Included in the statement of financial performance 

Relating to participations accounted for  
using the equity method 
Total 

2.14.2.  Guarantee Fund reserve 

2016 

 34 
 0 
 34 
 (0) 

 33 

EUR millions 
2015 

 79 
 (33) 
 46 
 7 

 53 

This  reserve  reflects  the  9 %  target  amount  of  the  outstanding  amounts  guaranteed  by  the  EU  budget 
under the EIB external lending mandate, that is required to be kept as assets in the Guarantee Fund for 
external actions (see note 2.4.1). 

2.14.3.  Other reserves 

The amount relates primarily to the ECSC in liquidation reserve (EUR 1 524 million) for the assets of the 
Research Fund for Coal and Steel, which was created in the context of the winding-up of the ECSC. 

55 

 
 
 
 
 
 
 
 
 
 
 
 
 
  
 
 
Annual accounts of the European Union 2016 

2.15.  AMOUNTS TO BE CALLED FROM MEMBER STATES 

Amounts to be called from Member States at 31.12.2015 
Return of 2015 budget surplus to Member States 
Movement in Guarantee Fund reserve 
Other reserve movements 
Economic result of the year 
Total amounts to be called from Member States at 31.12.2016 

EUR millions  

77 124 
1 349 
 82 
 58 
(1 733) 
76 881 

This  amount  represents  that  part  of  the  expenses  incurred  by  the  EU  up  to  31 December  that  must  be 
funded  by  future  budgets.  Many  expenses  are  recognised  under  accrual  accounting  rules  in  the  year  N 
although they may be actually paid in year N+1 (or later) and therefore funded using the budget of year 
N+1  (or  later).  The  inclusion  in  the  accounts  of  these  liabilities  coupled  with  the  fact  that  the 
corresponding amounts are financed from future budgets, results in liabilities greatly exceeding assets at 
the  year-end.  The  most  significant  amounts  to  be  highlighted  concern  the  European  Agricultural 
Guarantee Fund activities and employee benefit liabilities. 

It should also be noted that the above has no effect on the budget result – budget revenue should always 
equal or exceed budget expenditure and any excess of revenue is returned to Member States. 

56 

 
 
 
 
 
 
Annual accounts of the European Union 2016 

3.  NOTES TO THE STATEMENT OF FINANCIAL 

PERFORMANCE 

REVENUE 

REVENUE FROM NON-EXCHANGE TRANSACTIONS: OWN 
RESOURCES 

3.1.  GNI RESOURCES 

Own resources revenue is the primary element of the EU's operating revenue. Of the three categories of 
own  resources,  traditional  own  resources  ("TOR"),  the  VAT-based  resources  and  the  GNI-based 
resources, the GNI revenue of EUR 95 578 million (2015: EUR 95 355 million) is the most significant. 

3.2.  TRADITIONAL OWN RESOURCES 

Customs duties 
Sugar levies 
Total 

2016 
20 301 
 138 
20 439 

EUR millions 
2015 
18 524 
 125 
18 649 

Traditional  own  resources  comprise  custom  duties  and  sugar  levies.  Member  States  retain,  by  way  of 
collection  costs,  20 %  of  traditional  own  resources,  and  the  above  amounts  are  shown  net  of  this 
deduction. 

3.3.  VAT RESOURCES 

The VAT resource is levied on Member States’ VAT bases, which are notionally harmonised in accordance 
with EU rules for this purpose. The VAT contribution is calculated applying a uniform rate of call of 0.3 % 
to  the  base  of  each  Member  State.  For  the  period  2014-2020,  the  Council  Decision  2014/335/EU, 
Euratom,  foresees  a  reduced  rate  of  call  of  0.15 %  for  Germany,  the  Netherlands  and  Sweden.  The 
decrease of VAT revenue in 2016 is primarily explained by the fact that the reduced call rate was for the 
first time applicable in 2016, following the entry into force of the own resource decision (ORD) 2014. 

REVENUE FROM NON-EXCHANGE TRANSACTIONS: 
TRANSFERS 

3.4.  FINES 

These revenues of EUR 3 858 million (2015: EUR 531 million) relate to fines imposed by the Commission 
for  breach of  infringement rules,  mainly  related  to competition cases.  Receivables and related revenues 
are recognised when the Commission decision imposing a fine has been taken and it is officially notified 
to the addressee. The main amounts in 2016 and thus the significant increase as compared to the fines 
revenue  of  2015  concern  fines  in  the  markets  for  trucks  (EUR 2 927 million)  and  the  banking  sector 
(EUR 485 million). 

57 

 
 
 
 
 
 
 
 
 
 
 
 
 
Annual accounts of the European Union 2016 

3.5.  RECOVERY OF EXPENSES 

Shared management 
Direct management 
Indirect management 
Total 

2016 
1 876 
 56 
 15 
1 947 

EUR millions 

2015 
1 465 
 76 
 6 
1 547 

This heading mainly represents the recovery orders issued by the Commission that are cashed or offset 
against  (i.e.  deducted  from)  subsequent  payments  recorded  in  the  Commission's  accounting  system, 
made so as to recover expenditure previously paid out from the general budget. Recoveries are based on 
controls,  audits  or  eligibility  analysis  and  therefore,  these  actions  are  an  important  consideration  in 
implementing  the  EU  budget.  These  operations  protect  the  EU  budget  from  expenditure  incurred  in 
breach  of  law  and  are  particularly  important  since  the  audit  results  of  the  European  Court  of  Auditors 
have  found  a  material  level  of  error  in  payments  made  from  the  EU  budget  –  see  the  Court's  annual 
report including the statement of assurance on the legality and regularity of the underlying transactions. 

Recovery orders issued by Member States to beneficiaries of EAGF expenditure, as well as the variation of 
accrued income estimations from the previous year-end to the current, are also included.  

The  amounts  included  in  the  above  table  represent  revenue  incurred  through  the  issuance  of  recovery 
orders.  For  this  reason,  these  figures  cannot  and  do  not  show  the  full  extent  of  the  measures  taken  to 
protect the EU budget, particularly for cohesion policy where specific mechanisms are in place to ensure 
the  correction  of  ineligible  expenditure,  most  of  which  do  not  involve  the  issuance  of  a  recovery  order. 
Not  included  are  amounts  recovered  through  offsetting  with  expenses,  amounts  recovered  by  way  of 
withdrawals and recoveries of pre-financing amounts. 

Shared management recoveries make up the bulk of the total: 

Agriculture: EAGF and rural development 

In the framework of the EAGF and the EAFRD, amounts accounted for as revenue of the year under this 
heading  are  financial  corrections  of  the  year  and  reimbursements  declared  by  Member  States  and 
recovered during the year, as well as the net increase in the outstanding amounts declared by  Member 
States to be recovered at year-end concerning fraud and irregularities. 

Cohesion policy 

The  main  amounts  related  to  cohesion  policy  include  recovery  orders  issued  by  the  Commission  to 
recover undue expenditure made in previous years and deductions from expenditure less the decrease in 
accrued income at year-end. 

3.6.  OTHER REVENUE FROM NON-EXCHANGE 

TRANSACTIONS 

Budgetary adjustments 
Staff taxes and contributions 
Contributions from third countries 
Contributions from Member States for external aid 
Transfer of assets 
Adjustment of provisions 
Agricultural levies 
Other 
Total 

58 

2016 
1 956 
1 189 
 953 
 732 
 147 
 14 
 5 
 744 
5 740 

EUR millions 

2015 
 984 
1 115 
 946 
 0 
 197 
 71 
 814 
 939 
5 067 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Annual accounts of the European Union 2016 

The budgetary adjustments include the budget surplus from 2015 (EUR 1 349 million) which is indirectly 
refunded to  Member States by  deduction  of the amounts of  own  resources they have to transfer to the 
EU in the following year – thus it is a revenue for 2016. 

Staff taxes and contributions revenue arises primarily from deductions from staff salaries and is made up 
of two significant amounts – staff pension contributions and taxes on income. 

Contributions from third countries are contributions from EFTA countries and accession countries. 

Contributions from Member States for external aid are mainly the amounts received to set up the Facility 
for Refugees in Turkey. 

Transfer  of  assets  revenue  relates  mainly  to  the  transfer  of  satellites  under  the  Copernicus  programme 
(former  GMES  programme)  from  the  European  Space  Agency  (ESA)  to  the  Commission (see  note  2.2). 
This transfer is a non-exchange transaction according to the EU accounting rules and will occur in future 
periods for the remaining Copernicus satellites currently under construction. 

Agricultural  levies  concern  milk  levies  which  are  a  market  management  tool  aimed  at  penalising  milk 
producers who exceed their reference quantities. As it is not linked to prior payments by the Commission, 
it is in practice considered as revenue for a specific purpose. The  large amount for milk levies last year 
was due primarily to the superlevy of EUR 811 million. 

REVENUE FROM EXCHANGE TRANSACTIONS 

3.7.  FINANCIAL INCOME 

Interest income on: 
  Pre-financing 
  Late payments 
  Available for sale financial assets 
  Loans 
  Cash and cash equivalents 
  Impaired financial assets 
  Other  
Interest income 
Dividend income 
Realised gains on sale of financial assets 
Financial income from financial assets or liabilities  
at fair value through surplus or deficit 
Other financial income 
Total 

2016 

 (0) 
 108 
 24 
1 446 
 6 
 9 
 0 
1 592 
 13 
 35 
 0 

 128 
1 769 

EUR millions 
2015 

 9 
 20 
 56 
1 616 
 14 
 7 
 0 
1 721 
 8 
 50 
– 

 66 
1 846 

Interest income on loans relates mainly to loans granted for financial assistance (see note 2.4.3). 

3.8.  OTHER REVENUE FROM EXCHANGE TRANSACTIONS 

Foreign exchange gains 
Fee revenue for rendering of services 
Fee and premium revenue related to financial instruments 
Sales of goods 
Property, plant and equipment related revenue 
Other 
Total 

59 

2016 
 331 
 267 
 48 
 46 
 17 
 288 
 996 

EUR millions 
2015 
 970 
 358 
 43 
 43 
 4 
 145 
1 562 

 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
Annual accounts of the European Union 2016 

EXPENSES 

3.9.  SHARED MANAGEMENT 

Implemented by Member States 
European Agricultural Guarantee Fund 
European Agricultural Fund for Rural Development and 
other rural development instruments 
European Regional Development Fund and Cohesion Fund 
European Social Fund 
Other 
Total 

2016 
44 152 
12 604 

35 045 
9 366 
1 606 
102 772 

EUR millions 
2015 
45 032 
16 376 

38 745 
9 849 
2 380 
112 382 

The  transition  from  the  former  programming  period  2007-2013  to  the  period  2014-2020  explains  the 
reduction of expenses of EUR 4.2 billion for the cohesion area: as would be expected, the costs declared 
for  the  previous  period  are  decreasing,  while  the  costs  related  to  the  current  period  are  increasing  but 
remain lower. The same reason explains the decrease of expenses incurred under European Agricultural 
Fund for  Rural Development (EAFRD)  and other rural development instruments by  EUR 3.8 billion – see 
also note 2.13. 

The  sub-heading  ‘Other’  mainly  includes:  Fisheries  and  Maritime  Affairs  (EUR 756 million),  Asylum  and 
Migration (EUR 310 million) and Fund for European Aid to the Most Deprived (EUR 178 million). 

3.10.  DIRECT MANAGEMENT 

Implemented by the Commission 
Implemented by EU Executive Agencies 
Implemented by Trust funds 
Total 

2016 
9 254 
6 259 
 97 
15 610 

EUR millions 
2015 
10 089 
5 532 
 6 
15 626 

These  amounts  mainly  concern  the  implementation  of  Research  Policy  (EUR 7.1 billion)  and  Networks 
Programmes (EUR 2.0 billion), as well as European Neighbourhood Policy (EUR 1.0 billion), Development 
Co-operation Instruments (EUR 1.2 billion) and Humanitarian Aid (EUR 0.7 billion). 

3.11.  INDIRECT MANAGEMENT 

Implemented by other EU agencies and bodies 
Implemented by third countries 
Implemented by international organisations 
Implemented by other entities 
Total 

2016 
2 547 
 876 
2 382 
2 035 
7 840 

EUR millions 

2015 
1 209 
 905 
2 127 
2 107 
6 348 

60 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Annual accounts of the European Union 2016 

3.12.  STAFF AND PENSION COSTS 

Staff costs 
Pension costs 
Total 

2016 
6 074 
3 702 
9 776 

EUR millions 
2015 
5 838 
4 435 
10 273 

Pension costs represent elements of the movements that have arisen following the actuarial valuation of 
the employee benefits liabilities other than actuarial assumptions. 

3.13.  CHANGES IN EMPLOYEE BENEFITS ACTUARIAL 

ASSUMPTIONS 

The actuarial loss of net EUR 1 billion shown under this heading relates to the employee benefits liabilities 
recognised on the balance sheet (see note 2.9). 

3.14.  FINANCE COSTS 

Interest expenses: 
  Borrowings 
  Other 
Finance leases 
Impairment losses on available for sale financial assets 
Impairment losses on loans and receivables 
Realised loss on sale of financial assets 
Loss on financial assets or liabilities at fair value through 
surplus or deficit 
Other finance costs 
Total 

2016 

1 440 
 57 
 67 
 40 
 184 
 0 
 1 

 116 
1 904 

EUR millions 
2015 

1 607 
 21 
 91 
 27 
 174 
 3 
– 

 63 
1 986 

The  amount  of  interest  expense  on  borrowings  corresponds  to  interest  income  on  loans  for  financial 
assistance (back-to-back transactions). 

3.15.  SHARE OF RESULT OF JOINT VENTURES AND 

ASSOCIATES 

In  accordance  with  the  equity  method  of  accounting,  the  EU  includes  in  its  statement  of  financial 
performance its share of the result of its joint ventures and associates - see note 2.3. 

61 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Annual accounts of the European Union 2016 

3.16.  OTHER EXPENSES 

Administrative and IT expenses 
Property, plant and equipment related expenses 
Adjustment of provisions 
Foreign exchange losses 
Reduction of fines by the Court of Justice 
Other 
Total 

2016 
2 455 
1 404 
 685 
 505 
 18 
 419 
5 486 

EUR millions 

2015 
2 419 
1 304 
 520 
 785 
1 137 
458 
6 623 

The decrease in other expenses is mainly due to write-off of fines imposed in 2015, where the Court of 
Justice had decided in favour of the fined undertaking. 

Included  under  Property,  plant  and  equipment  related  expenses  are  EUR 383 million  (2015: 
EUR 373 million) relating to operating leases. 

Expenses relating to research and  development are  included in  administrative and IT expenses and are 
as follows: 

Research costs 
Non-capitalised development costs 
Total 

2016 
 344 
 88 
 431 

EUR millions  
2015 
 384 
 60 
 443 

62 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
3.17.  SEGMENT REPORTING BY MULTIANNUAL FINANCIAL FRAMEWORK HEADING (MFF) 

 Annual accounts of the European Union 2016 

Smart and 
inclusive 
growth 

Sustainable 
growth 

Security 
and 
citizenship 

Global 
Europe 

Administration 

GNI resources 
Traditional own resources 
VAT 
Fines 
Recovery of expenses 
Other 
Revenue from non-exchange transactions 
Financial income 
Other 
Revenue from exchange transactions 

Total revenue 

Expenses implemented by Member States: 
  EAGF 
  EAFRD & other rural development instruments 
  ERDF & CF 
  ESF 
  Other 
Implemented by the EC, executive agencies and 
trust funds 
Implemented by other EU agencies and bodies 
Implemented by third countries and int. org. 
Implemented by other entities 
Staff and Pension costs 
Changes in employee benefits actuarial 
assumptions 
Finance costs 
Share of result of joint ventures & associates 
Other expenses 

– 
– 
– 
– 
 48 
 785 
 834 
 87 
 121 
 208 

1 041 

– 
– 
(35 045) 
(9 366) 
 (466) 
(10 143) 

(2 028) 
 (274) 
(1 411) 
(1 593) 
– 

 (173) 
 2 
(1 468) 

– 
– 
– 
– 
1 871 
 171 
2 041 
 0 
 (11) 
 (11) 

2 030 

(44 152) 
(12 604) 
– 
– 
 (754) 
 (544) 

 (110) 
 (5) 
 (16) 
 (345) 
– 

 (47) 
– 
 (83) 

– 
– 
– 
– 
 4 
 28 
 32 
 0 
 (7) 
 (7) 

 25 

– 
– 
– 
– 
 (470) 
 (957) 

 (662) 
 (188) 
 (2) 
 (390) 
– 

 (1) 
– 
 (102) 

Total expenses 
Economic result of the year 

(61 964) 
(60 923) 

(58 659) 
(56 629) 

(2 772) 
(2 747) 

– 
– 
– 
– 
 23 
 105 
 128 
 21 
 (5) 
 16 

 144 

– 
– 
– 
– 
 84 
(3 951) 

 (265) 
(2 792) 
 (606) 
 (575) 
– 

 (20) 
– 
 (70) 

(8 195) 
(8 051) 

– 
– 
– 
– 
– 
4 750 
4 750 
 0 
 307 
 307 

5 057 

– 
– 
– 
– 
– 
 (50) 

– 
– 
 (0) 
(5 968) 
(1 068) 

 (127) 
– 
(3 196) 

(10 409) 
(5 352) 

Not 
assigned to 
MFF 
heading* 
95 578 
20 439 
15 859 
3 858 
 1 
 (97) 
135 638 
1 661 
 592 
2 253 

137 891 

– 
– 
– 
– 
– 
 34 

 518 
– 
– 
 (904) 
– 

(1 536) 
– 
 (566) 

(2 455) 
135 436 

EUR millions 

Total 

95 578 
20 439 
15 859 
3 858 
1 947 
5 740 
143 422 
1 769 
 996 
2 765 

146 187 

(44 152) 
(12 604) 
(35 045) 
(9 366) 
(1 606) 
(15 610) 

(2 547) 
(3 258) 
(2 035) 
(9 776) 
(1 068) 

(1 904) 
 2 
(5 486) 

(144 454) 
1 733 

* 

"Not-assigned to MFF heading" includes consolidated entities' budget execution and consolidation eliminations, off-budget operations and unallocated programmes with immaterial amounts. 

The display of revenue and expenses by MFF heading is based on estimation as not all commitments are linked to an MFF heading.  

63 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Annual accounts of the European Union 2016 

4. 

CONTINGENT LIABILITIES AND ASSETS 

4.1.  CONTINGENT LIABILITIES 

Contingent liabilities are possible future payment obligations for the EU that may arise due to past events 
or  legally  binding  commitments  taken  but  which  will  depend  on  future  events  not  wholly  under  the 
control  of  the  EU.  They  relate  mainly  to  financial  guarantees  given  (on  loans  and  financial  assistance 
programmes)  and  to  legal  risks.  All  contingent  liabilities,  except  those  relating  to  fines  and  guarantees 
covered by funds (see note 2.4.1), would be financed, should they fall due, by the EU budget (and thus 
the EU Member States) in the years to come. 

4.1.1.  Budgetary guarantees 

EIB external lending 
mandate guarantees 
EFSI guarantee 

Total 

Ceiling 

40 645 

16 000 

56 645 

31.12.2016 

Signed 

30 161 

11 245 

41 406 

Disbursed 

21 145 

4 392 

25 537 

Ceiling 

41 764 

16 000 

57 764 

31.12.2015 

Signed 

28 741 

1 252 

29 993 

EUR millions 

Disbursed 

19 450 

 202 

19 652 

The above table shows the extent of the exposure of the EU budget to possible future payments linked to 
guarantees  given  to  the  EIB  group.  Disbursed  amounts  represent  the  amounts  already  given  to  final 
beneficiaries, while signed amounts include these disbursed monies plus agreements already signed with 
beneficiaries  but  not  yet  disbursed.  The  ceiling  represents  the  total  guarantee  that  the  EU  budget,  and 
thus its Member States, have committed to cover. 

EIB external lending mandate guarantees 

The  EU  budget  guarantees  loans  signed  and  granted  by  the  EIB  from  the  EIB's  own  resources  to  third 
countries.  At  31 December 2016  the  amount  of  loans  outstanding  and  covered  by  the  EU  guarantee 
totalled EUR 21.1 billion. The EU budget guarantees: 

  EUR 19 481 million (2015: EUR 19 450 million) via the Guarantee Fund for external actions (see 

note 2.4.1), and 

  EUR 1 664 million (2015: EUR 1 987 million) directly for loans granted to Member States before 

accession. 

In  addition  to  the  EUR 21.1 billion  disclosed  above  as  a  contingent  liability,  the  EU  guarantees 
EUR 309 million of outstanding loans to Syria for which provisions have been made – see note 2.10. 

The EU external lending mandate guarantee relating to loans granted by the EIB is limited to 65 % of the 
outstanding  balances  for  agreements  signed  after  2007  (mandates  2007-2013  and  2014-2020).  For 
agreements  before  2007  the  EU  guarantee  is  limited  to  a  percentage  of  the  ceiling  of  the  credit  lines 
authorised, in most cases 65 % but also 70 %, 75 % or 100 %. Where the ceiling is not reached, the EU 
guarantee covers the full amount. 

To  disclose  the  maximum  exposure  faced  by  the  EU  at  31 December 2016,  however,  one  must  also 
include  loans  authorised  to  be  signed  but  not  yet  signed  (EUR 10.5 billion)  and  loans  signed  but  not 
disbursed (EUR 9 billion). 

European Fund for Strategic Investments (EFSI) guarantee 

EFSI is an initiative that aims to increase the risk bearing capacity of the EIB Group by enabling the EIB 
to invest up to EUR 61 billion in the EU. EFSI is not a separate legal entity or an investment fund in the 
strict  sense.  The  EFSI  risk  reserve  offers  protection  to  the  EIB  against  potential  losses  for  underlying 
operations.  It  is  composed  of  an  allocation  of  EUR 5 billion  of  EIB's  own  capital  and  an  EU  budget 
guarantee  of  up  to  EUR 16 billion  (cap  amount).  It  is  the  objective  that  additional  funding  of  Member 
States, national promotional banks and private investors would bring the investments in the EU to a total 
of EUR 315 billion. 

64 

 
 
 
 
 
 
 
 
 
 
Annual accounts of the European Union 2016 

The EFSI operations are conducted within two windows: the Infrastructure and Innovation Window (IIW) 
implemented by the EIB (EU guarantee of EUR 13 billion) and the SME Window (SMEW) implemented by 
the EIF (EU guarantee of EUR 3 billion), both of which will have a debt portfolio and an equity portfolio. 
The EIF acts under an agreement with the EIB on the basis of an EIB guarantee which itself is counter-
guaranteed by the EU. 

For the purpose of the use of the EU  guarantee the implementation of EFSI is supervised by  a steering 
board  acting  by  consensus  and  composed  of  four  members  of  which  three  are  appointed  by  the 
Commission and one by the EIB. The steering board does not take investment decisions. 

The  EU  and  the  EIB  have  distinct  roles  within  EFSI.  EFSI  is  established  within  the  EIB  who  finance  the 
operations  (debt  and  equity  investments)  and,  to  do  this,  borrow  the  necessary  funds  on  the  capital 
markets.  Regarding  the  IIW,  the  EIB  takes  the  investment  decisions  independently  and  manages  the 
operations in accordance with its rules and procedures, the same as applied to its own (risk) operations. 
In  order  to  ensure  that  investments  made  under  EFSI  remain  focused  on  the  specific  objective  of 
addressing  the  market  failures  which  hinders  investment  in  the  EU  and  that  they  are  eligible  for  the 
protection of the EU guarantee, a dedicated governance structure has been put in place. The investment 
committee of independent experts examines each project proposed by the EIB regarding its eligibility for 
the EU guarantee coverage. Once an operation is confirmed to be eligible, as EFSI guaranteed operation, 
the decision to continue with the project and its management is then subject to the normal EIB project 
cycle and governance process. 

The role of the EU relates to the provision of the EU budget guarantee for part of the potential losses that 
the EIB may suffer from its investments in debt and equity instruments. Consequently, the EU does not 
intervene  in  the  selection  and  management  of  EFSI  operations,  does  not  invest  money  in  the  EFSI 
operations  and  it  is  not  a  direct  contractual  party  to  the  underlying  instruments.  As  the  control  criteria 
and accounting requirements for consolidation of the EU accounting rules (and IPSAS) are not met, the 
related assets are not accounted for in the consolidated annual accounts of the EU. 

At all times, the EU guarantee is capped at EUR 16 billion and the aggregate net payments from the EU 
budget  shall  not  exceed  this  amount.  EU  guarantee  payments  would  be  made  by  the  EFSI  Guarantee 
Fund  –  see  note  2.4.1.  At  the  end  of  2016  the  assets  of  the  guarantee  fund  total  EUR 1  billion,  while 
another EUR 2.4 billion have been committed but not yet paid and is included in the amount disclosed as 
RAL in note 5.1.  

The EU guarantee granted to the EIB group under EFSI is accounted for as a financial guarantee liability 
in  respect  of  the  debt  portfolio  and  as  a  contingent  liability  for  both  debt  and  equity  portfolios.  As  the 
guaranteed  investments  are  financed  and  controlled  by  the  EIB,  the  related  financial  assets  are  not 
accounted for in the consolidated annual accounts of the EU. 

Under the EFSI IIW debt portfolio, the EU guarantee covers the first loss piece of a portfolio of financing 
operations entered into by the EIB, which are mainly standard loans and guarantees. The EU guarantee is 
called when the debtor fails to make a payment when due or in the case of a debt restructuring. The EU 
guarantee  is  remunerated  in  proportion  to  the  risk  taken  by  the  EU  and  this  happens  in  the  form  of  a 
distribution,  between  the  EIB  and  the  EU,  of  the  risk-related  revenues  received  by  EIB  from  the 
guaranteed  operations.  The  EU  revenues  should  first  cover  the  losses  incurred  on  the  guaranteed 
operations. The EU guarantee is therefore accounted for as financial guarantee liability and measured, at 
initial  recognition,  at  fair  value,  being  the  net  present  value  of  the  premiums  receivable  (the  EU 
revenues). At subsequent balance sheet dates, the financial guarantee liability is measured at the higher 
of  the  expected  losses  and  the  amount  initially  recognised  less,  when  appropriate,  the  accumulated 
amortisation of the revenue. The financial guarantee liability is presented net of the EU revenues still to 
be received – zero at 31 December 2016 – see note 2.11.3. 

Under  the  EFSI  IIW  equity  portfolio,  which  consists  of  direct  equity  or  quasi  equity  participations  or 
subordinated  loans,  the  EIB  invests  pari-passu  at  its  own  risk  and  also  at  the  risk  of  the  EU. 
Consequently, the EU guarantee covers for the part of the equity investments guaranteed by the EU, the 
negative  value  adjustments  (unrealised  losses)  at  each  balance  sheet  date,  the  realised  losses  at  dis-
investment and the EIB funding costs. In cases where the value of an investment, which was previously 
subject to a negative value adjustment, increases at subsequent reporting dates, the amount up to the 
original cost of the investment is reimbursed by the EIB to the EU. At the time of the dis-investment, the 
EU  is  also  entitled  to  gains  on  the  investment  exceeding  the  original  cost.  The  EU  guarantee  is 
remunerated  by  revenues  received  by  the  EIB  from  the  guaranteed  operations,  including  interests, 
dividends and realised gains. The settlement between the EU and the EIB happens annually net of losses 
and revenues. At 31 December 2016, EUR 35.7 million of EU guaranteed operations under the IIW equity 
portfolio have been invested, which were recorded as a contingent liability.  

65 

 
Annual accounts of the European Union 2016 

The  SMEW  equity  portfolio,  only  began  in  2016  and  amounts  have  been  immaterial.  The  accounting 
treatment  of  the  equity  operations  will  be  established  by  the  Accounting  Officer  after  consulting  the  EU 
Advisory Group of Experts on Accounting Standards. EUR 5 million have been invested by the EIF and are 
shown as contingent liability at 31 December 2016. 

The  contingent  liability  above  includes  operations  of  the  COSME  and  H2020  programmes  which  are 
covered by the EFSI EU guarantee under SMEW debt portfolio. 

4.1.2.  Guarantees relating to financial assistance (borrowing and lending activities) 

31.12.2016 

Drawn 

Undrawn 

Total 

EFSM 

BOP 

MFA 

Euratom 

Total 

47 456 

4 272 

2 964 

 252 

54 944 

– 

– 

1 313 

 300 

1 613 

47 456 

4 272 

4 277 

 552 

Drawn 

47 509 

5 811 

3 024 

 301 

56 557 

56 645 

EUR millions 

31.12.2015 

Undrawn 

Total 

– 

– 

1 323 

 300 

1 623 

47 509 

5 811 

4 347 

 601 

58 268 

The EU  budget guarantees the borrowings in  the back-to-back  transactions of  the Commission taken  to 
finance  lending  to  Member  and  non-Member  States  –  see  also  note  6.  These  borrowings  are  already 
recognised  as  liabilities  on  the  EU  balance  sheet  -  see  note  2.11.1  for  further  details. However,  should 
there be a default on the back-to-back-loans given  out  with  these borrowings,  the EU  budget  based  on 
Article 14 of Council Regulation 609/2014 would have to bear the full cost of the amount defaulted:  

  Borrowings related to loans disbursed under the EFSM are guaranteed solely by the EU budget; 

  Borrowings related to BOP loans are guaranteed solely by the EU budget; 

  MFA loans are firstly guaranteed by the Guarantee Fund for external actions (see note 2.4.1) and 

then by the EU budget; and  

  Guarantees  from  third-parties  are  the  first  cover  for  the  entire  amounts  of  the  outstanding 
Euratom  loans.  The  Guarantee  Fund  would  cover  the  external  lending  amounts  should  the  third 
party guarantees not provide for them. 

ECSC  in  Liquidation  loans  granted  on  borrowed  funds  are  not  covered  by  an  EU  budgetary  guarantee. 
Instead, they are covered by financial assets of the ECSC in Liquidation – see note 2.4.1.  

4.1.3.  Guarantees given for EU financial instruments 

Horizon 2020 
Risk Sharing Finance Facility 
Connecting Europe Facility* 
Other 
Total 

31.12.2016 
 921 
 711 
 465 
 3 
2 101 

EUR millions 
31.12.2015 
 459 
 845 
 429 
 16 
1 749 

*  Previous year amounts relate to Project Bond Initiative and Loan Guarantee Instrument for TEN-T projects. These 

two instruments were merged in 2016 into the Connecting Europe Facility. 

As  mentioned  in  Article  140(3)  FR,  the  budgetary  expenditure  linked  to  a  financial  instrument  and  the 
financial  liability  of  the  EU  shall  in  no  case  exceed  the  amount  of  the  relevant  budgetary  commitment 
made for it, thus excluding contingent liabilities for the budget. In practise it means that these liabilities 
have a counter-part on the asset side of the balance sheet or are covered by the outstanding budgetary 
commitments  not  yet  expensed.  The  contingent  liabilities  above  are  shown  net  of  financial  provisions 
made for these instruments – see note 2.10. 

66 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
4.1.4. 

Legal cases 

Annual accounts of the European Union 2016 

Fines 
Agriculture 
Cohesion 
Other 
Total 

Fines 

31.12.2016 
1 834 
1 711 
 3 
 600 
4 148 

EUR millions 

31.12.2015 
3 951 
1 377 
 3 
 795 
6 125 

These amounts concern fines imposed by the Commission for infringement of competition rules that have 
been provisionally paid by fined companies as foreseen in Article 90(1) rules of application of the FR and 
where either an appeal has been lodged or where it is unknown if an appeal will be made. The contingent 
liability will be maintained until a decision by the Court of Justice on the case is final or until the expiry of 
the period for appeal. Interest earned on provisional payments is included in the economic result of the 
year  and  also  as  a  contingent  liability  to  reflect  the  uncertainty  of  the  Commission’s  title  to  these 
amounts. 

Should  the  EU  lose  any  of  these  cases  relating  to  fines  imposed,  there  would  be  no  charge  to  the  EU 
budget since the fines have been provisionally paid and this cash is held either in specific bank accounts 
(see note 2.8) or in the BUFI fund set up for this purpose (see note 2.4.1). The amount of fines are only 
recognised as budgetary revenue when they are definitive (Article 83 FR). 

Agriculture 

These  are  contingent  liabilities  towards  the  Member  States  connected  with  the  EAGF  conformity 
decisions,  rural  development  and  pre-accession  financial  corrections  pending  judgement  of  the  Court  of 
Justice.  The  determination  of  the  final  amount  of  the  liability  and  the  year  in  which  the  effect  of 
successful  appeals  will  be  charged  to  the  budget  will  depend  on  the  length  of  the  procedure  before  the 
Court. 

Cohesion 

These  are  contingent  liabilities  towards  the  Member  States  in  conjunction  with  actions  under  cohesion 
policy awaiting the oral hearing date or pending judgement of the Court of Justice. 

Other legal cases 

This heading relates to actions for damages currently being brought against the EU, other legal disputes 
and the estimated legal costs. It should be noted that in an action for damages under Article 288 EC the 
applicant  must  demonstrate  a  sufficiently  serious  breach  by  the  institution  of  a  rule  of  law  intended  to 
confer  rights  on  individuals,  real  harm  suffered  by  the  applicant,  and  a  direct  causal  link  between  the 
unlawful act and the harm. 

4.2.  CONTINGENT ASSETS 

Guarantees received: 
   Performance guarantees 
   Other guarantees 
Other contingent assets 
Total 

31.12.2016 

EUR millions 
31.12.2015 

 369 
 28 
 34 
 431 

 398 
 27 
 48 
 474 

Performance guarantees are requested to ensure that beneficiaries of EU funding meet the obligations of 
their contracts with the EU. 

67 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Annual accounts of the European Union 2016 

5.  BUDGETARY AND LEGAL COMMITMENTS 

This note provides information on the budgetary process and future funding needs and not on liabilities 
existing as at 31 December 2016. 

The  multiannual  financial framework  (MFF)  agreed  by  the  Member  States,  defines  the  programmes  and 
sets  out  the  heading  ceilings  for  commitment  appropriations  and  the  total  for  payment  appropriations 
within which the EU may enter into budgetary and legal commitments, and ultimately make payments for 
a period of 7 years – see table 1.1 in the notes to the budgetary implementation reports. 

The  MFF  ceilings  were  adopted  by  the  Council  (Member  States),  with  the  consent  of  the  European 
Parliament  and  Article  16  of  Regulation  1306/2013  on  the  financing  of  the  CAP  makes  a  direct  link 
between  the  annual  ceiling  of  EAGF  expenditure  and  the  MFF  Regulation.  The  European  Parliament  and 
the Council also adopted the respective basic acts for the EAGF expenditure that set out the expenditure 
per Member State for the entire period 2014-2020. 

Legal  commitments  correspond  to  programmes,  projects,  agreements  or  contracts  signed,  thus  legally 
binding  the  EU.  A  legal  commitment  is  the  act  whereby  the  authorising  officer  enters  or  establishes  an 
obligation (for the EU) which results in a charge (Article 85 FR).  

A  budgetary  commitment  is  in  principle  made  before  the  legal  commitment,  but  for  some  multiannual 
programmes/projects  it  is  the  reverse,  the  relevant  budgetary  commitments  being  made  in  annual 
instalments, over several years, when the basic act so provides for. For example, for cohesion, Article 76 
of the Common Provisions Regulation (CPR) (Regulation (EU) No 1303/2013) provides that the decision 
of the Commission adopting a programme shall constitute a legal commitment within the meaning of the 
Financial Regulation but that the budget commitments of the Union in respect of each programme shall 
be  made  in  annual  instalments  for  each  Fund  during  the  period  between  1  January  2014  and 
31 December  2020.  Other  legal  bases  may  contain  similar  provisions.  For  this  reason,  there  may  be 
amounts  that  the  EU  has  legally  committed  to  pay,  but  where  the  budgetary  commitment  has  not  yet 
been made – see notes 5.2 and 5.3 below. 

If  the  budgetary  commitment  has  been  made  but  the  subsequent  payments  are  not  yet  done,  the 
amount of outstanding commitment is called "Reste à Liquider" (RAL). This can represent programmes or 
projects,  often  multiannual,  signed  but  which  are  not  yet  (fully)  implemented.  They  represent  payment 
obligations for future years. Part of the overall amounts unpaid (RAL) has already been expensed and is 
recognised  as  a  liability  on  the  balance  sheet  (see  notes  2.12  and  2.13).  The  calculation  of  these 
expenses  is  made  based  on  cost  claims/invoices  received  and  on  the  estimated  implementation  of  a 
programme or project where no claims have been notified yet to the EU – see note 5.1 below. Once the 
payments  relating  to  the  RAL  are  made  after  31 December 2016,  the  liability  on  the  balance  sheet  is 
derecognised.  The  part  of  the  RAL  not  expensed  yet  is  not  included  under  liabilities  but  is  instead 
disclosed below. 

The disclosures below  thus represent  amounts at  31 December 2016  that the EU  has committed to pay 
based on the fulfilment of the contractual agreements and which are therefore intended to be funded by 
future EU budgets. 

Outstanding budgetary commitments not yet 
expensed 
Shared management legal commitments under the 
current MFF pending implementation 
Significant legal commitments in other areas 
Total 

Note 
5.1 

5.2 

5.3 

31.12.2016 
189 881 

EUR millions 

31.12.2015 
177 477 

276 351 

338 755 

22 275 
488 507 

19 098 
535 329 

68 

 
 
 
 
 
 
 
Annual accounts of the European Union 2016 

5.1.  OUTSTANDING BUDGETARY COMMITMENTS NOT YET 

EXPENSED 

Outstanding budgetary commitments not yet expensed 

31.12.2016 
189 881 

EUR millions 
31.12.2015 
177 477 

The  amount  disclosed  above  is  the  budgetary  RAL  ("Reste  à  Liquider")  of  EUR 238 759 million,  less 
related  amounts  that  have  been  included  as  liabilities  on  the  balance  sheet  and  as  expenses  in  the 
statement  of  financial  performance.  The  budgetary  RAL  is  an  amount  representing  the  open 
commitments for which payments and/or de-commitments have not yet been made. As explained above, 
this is the normal consequence of the existence of multiannual programmes.  

that  outstanding  pre-financing  advances  at  31 December 2016 

It  should  be  noted 
totalled 
EUR 45.5 billion (see note 2.5). This represents budgetary commitments that have been paid, decreasing 
the  RAL,  but  where  the  amounts  paid  are  still  considered  as  belonging  to  the  EU  and  not  to  the 
beneficiary  until  the  contractual  commitments  are  fulfilled.  They  are  thus  like  the  RAL  disclosed  above, 
not yet expensed.  

5.2.  SHARED MANAGEMENT LEGAL COMMITMENTS UNDER 
THE CURRENT MFF PENDING IMPLEMENTATION  

Financial 
framework 
2014-2020 
(A) 

Legal 
commitments 
concluded (B) 

Budget 

commitments    

(C ) 

Decommit-   
ments (D) 

Funds 

European Regional 
Development Fund and 
Cohesion Fund 
European Social Fund 
Fund for European Aid to the 
most Deprived 
HEADING 1B: COHESION 
POLICY FUNDS 
European Agricultural Fund for 
Rural Development  
European Maritime and 
Fisheries Fund 
HEADING 2: NATURAL 
RESOURCES 

Asylum and Migration Fund 

Internal Security Fund 

HEADING 3: SECURITY & 
CITIZENSHIP 

262 058 

262 058 

102 172 

91 991 

3 814 

91 991 

3 814 

38 418 

1 570 

357 862 

357 862 

142 160 

99 348 

99 348 

42 064 

5 749 

5 749 

2 392 

105 097 

105 097 

44 455 

3 607 

2 195 

5 802 

1 977 

 981 

2 958 

1 970 

 981 

2 951 

Total 

468 761 

465 917 

189 566 

Budget 
available 
under MFF 
(=A-C) 

EUR millions 
Legal 
commitments 
less budget 
commitments 
(=B-C+D) 

159 886 

159 886 

53 573 

2 244 

53 573 

2 244 

215 702 

215 702 

57 284 

57 284 

3 358 

3 358 

60 641 

60 641 

1 637 

1 214 

2 851 

 7 

 0 

 7 

279 195 

276 351 

– 

– 

– 

– 

– 

– 

– 

– 

– 

– 

– 

These  are  legal  obligations  that  the  EU  has  committed  to  paying  when  adopting  the  operational 
programmes  related  to  shared  management.  The  decision  of  the  Commission  adopting  an  operational 
programme shall constitute a financing decision within the meaning of Article 84 FR and once notified to 
the Member State concerned, a legal commitment within the meaning of that Regulation. 

Article 76 of the CPR for European Structural and Investment Funds (ESIF) states:  

"The  budget  commitments  of  the  Union  in  respect  of  each  programme  shall  be  made  in  annual 
instalments for each Fund during the period between 1 January 2014 and 31 December 2020. The budget 
commitments relating to the performance reserve in each programme shall be made separately from the 
remaining allocation to the programme." 

The table above starts with the total MFF (column A) and shows the legal commitments for which budget 
commitments  have  not  yet  been  made  and,  for  information,  the  maximum  commitments  in  relation  to 
the  ceilings  foreseen  in  the  MFF  2014-2020,  headings  1B,  2  and  3.  These  legal  commitments  thus 
represent  the  outstanding  amounts  for  which  the  EU  is  committed  to  pay  after  31  December  2016. 

69 

 
 
 
 
 
 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Annual accounts of the European Union 2016 

Column B shows the legal commitments concluded by the Commission at year-end and column C shows 
the  budget  commitments  made  available  relating  to  these  legal  commitments  at  year-end.  At 
31 December 2016 no decommitments (column D) have been made. 

5.3.  SIGNIFICANT LEGAL COMMITMENTS IN OTHER AREAS 

Connecting Europe Facility 
Copernicus 
ITER 
Galileo  
Fisheries agreements 
Operating lease commitments 
Other contractual commitments 
Total 

31.12.2016 
13 799 
2 393 
1 891 
 523 
 247 
2 419 
1 003 
22 275 

EUR millions 
31.12.2015 
10 051 
2 939 
2 022 
 124 
 373 
2 511 
1 079 
19 098 

These  amounts  reflect  the  long-term  legal  commitments  that  were  not  yet  covered  by  commitment 
appropriations  in  the  budget  at  year-end.  These  binding  obligations  will  be  budgeted  in  annual 
instalments in future years and paid.  

Certain  important  programmes  (see  below)  may  be  implemented  by  annual  instalments  according  to 
Article  85(4)  FR.  This  allows  the  EU  to  make  legal  commitments  (sign  grant  agreements,  delegation 
agreements and procurement contracts) in excess of the available commitment appropriations of a given 
year.  Therefore  a  substantial  amount  of  the  overall  allocation  for  the  current  MFF  may  be  already 
committed. This applies in particular for the following programmes: 

  Connecting Europe Facility; 

  Copernicus; 

 

ITER; and 

  Galileo. 

Connecting Europe Facility (CEF) 

The CEF provides financial assistance to trans-European networks in order to support projects of common 
interest  in  the  sectors  of  transport,  telecommunications  and  energy  infrastructures.  The  legal 
commitments for the CEF programme cover a period running from 2014 until 2020 for the CEF Transport 
and up to 2021 for CEF Energy. The legal basis of these commitments is Regulation (EU) No 1316/2013 
of the EP and of the Council of 11 December 2013 establishing the Connecting Europe Facility, amending 
Regulation  (EU)  No 913/2010  and  repealing  Regulations  (EC)  No 680/2007  and  (EC)  No 67/2010  Text 
with EEA relevance (OJ L 348, 20 December 2013) which foresees the use of the annual instalment in its 
article 19. 

Copernicus 

Copernicus is the European Earth observation programme  – see also note 2.2. These commitments are 
made for the period until 2020. Based on Regulation (EU) 377/2014 of the EP and Council of 3 April 2014 
(OJ L 122/44 of  24 April 2014)  the Commission  signed delegation agreements with the European Space 
Agency  (ESA),  EUMETSAT  and  the  European  Centre  for  Medium  Range  weather  forecasts.  Article  8  of 
Regulation 377/2014 authorises the use of annual instalments. 

ITER – International Thermonuclear Experimental Reactor 

These commitments are intended to cover future funding needs of the ITER facilities up to 2021. The EU 
(Euratom)  contribution  to  ITER  International  is  given  through  the  Fusion  for  Energy  Agency,  including 
also the contributions from Member States and from Switzerland. These commitments are made on the 
basis  of  Council  decision  (Euratom)  791/2013  of  13 December 2013  amending  decision  (Euratom) 
198/2007  establishing  the  European  Joint  Undertaking  for  ITER  and  the  Development  of  Fusion  Energy 
which  authorises  the  use  of  annual  instalments.  ITER  was  created  to  manage  and  to  encourage  the 
exploitation of the ITER facilities, to promote public understanding and acceptance of fusion energy, and 

70 

 
 
 
 
 
 
 
 
 
Annual accounts of the European Union 2016 

to undertake any other activities that are necessary to achieve its purpose. ITER involves the EU, China, 
India, Russia, South Korea, Japan and the USA.  

Galileo 

These  are  amounts  committed  to  the  Galileo  programme  developing  a  European  Global  Navigation 
Satellite System – see also note 2.2. These commitments are made for the period until 2020. Based on 
Regulation  (EU)  1285/2013  of  the  EP  and  Council  of  11 December 2013  (OJ  L  347/1  of 
20 December 2013)  the  Commission  signed  a  delegation  agreement  with  ESA.  Article  9  of  Regulation 
(EU) 1285/2013 authorises the use of annual instalments. 

Fisheries agreements 

These  are  commitments  entered  into  up  to  2020  with  third  countries  for  operations  under  international 
fisheries  agreements.  These  commitments  are  made  based  on  Council  decisions  for  each  third  country 
(e.g. Council decision (EU) 1894/2015 of 5 October 2015 on the conclusion of the Protocol between the 
European  Union  and  the  Republic  of  Cape  Verde  setting  out  the  fishing  opportunities  and  the  financial 
contribution provided for in the Fisheries Partnership Agreement between the European Community and 
the Republic of  Cape Verde; OJ L 277,  22 October 2015).  These  are  specific international treaties  which 
imply multiannual rights and obligations. 

Operating lease commitments 

Minimum amounts committed to be paid according to the underlying contracts during the remaining term 
of these lease contracts are as follows: 

Future amounts to be paid 

EUR millions 

Buildings 
IT materials and other equipment 
Total 

< 1 year 
 373 
 7 
 380 

1- 5 years 
1 085 
 10 
1 095 

> 5 years 
 944 
 0 
 944 

Total 
2 402 
 17 
2 419 

Other contractual commitments 

The amounts included under this disclosure correspond to amounts committed to be paid during the term 
of the contracts. The most significant amount included here relates to building contracts of the European 
Parliament (EUR 276 million). 

71 

 
 
 
 
 
 
 
 
Annual accounts of the European Union 2016 

6. 

FINANCIAL RISK MANAGEMENT 

The following disclosures with regard to the financial risk management of the EU relate to: 

- 

- 

- 

- 

Borrowing  and  lending  activities  for  financial  assistance  carried  out  by  the  Commission  through: 
EFSM, BOP, MFA, and Euratom actions and the ECSC in Liquidation;  

The  treasury  operations  carried  out  by  the  Commission  in  order  to  implement  the  EU  budget, 
including the receipt of fines;  

Assets held in funds for budgetary guarantees: The Guarantee Fund for external actions and the EFSI 
Guarantee Fund; and 

Financial instruments financed by the EU budget. 

6.1.  TYPES OF RISK 

Market  risk  is  the  risk  that  the  fair  value  or  future  cashflows  of  a  financial  instrument  will  fluctuate, 
because of variations in market prices. Market risk embodies not only the potential for loss, but also the 
potential  for  gain.  It  comprises  currency  risk,  interest  rate  risk  and  other  price  risk  (the  EU  has  no 
significant other price risk). 

(1)  Currency risk is the risk that the EU's operations or its investments' value will be affected by changes 

in exchange rates. This risk arises from the change in price of one currency against another.  

(2)  Interest  rate  risk  is  the  possibility  of  a  reduction  in  the  value  of  a  security,  especially  a  bond, 
resulting from an increase in interest rates. In general, higher interest rates will lead to lower prices 
of fixed rate bonds, and vice versa. 

Credit risk is the risk of loss due to a debtor's/borrower's non-payment of a loan or other line of credit 
(either  the  principal  or  interest  or  both)  or  other  failure  to  meet  a  contractual  obligation.  The  default 
events include a delay in repayments, restructuring of borrower repayments and bankruptcy. 

Liquidity  risk  is the risk that arises from  the difficulty in  selling  an asset; for  example, the risk  that a 
given  security  or  asset  cannot  be  traded  quickly  enough  in  the  market  to  prevent  a  loss  or  meet  an 
obligation. 

6.2.  RISK MANAGEMENT POLICIES  

The  implementation  of  the  EU  budget  relies  increasingly  on  the  use  of  operational  programme  financial 
instruments. The basic concept behind this new approach, in contrast to the traditional method of budget 
implementation by giving grants and subsidies, is that for each euro spent from the budget via financial 
instruments,  the  final  beneficiary  receives  more  than  EUR  1  as  financial  support  due  to  the  leverage 
effect. This use of the EU budget maximises the impact of the funds available. For more information on 
the amounts concerned, see note 2.4.1. 

Common to most financial instruments is the fact that the implementation is delegated to either the EIB 
group (including EIF) or to other financial institutions based on  an agreement between the Commission 
and the financial  institution.  Agreements  signed with these financial institutions include strict conditions 
and obligations on the intermediaries so as to ensure that EU monies are properly managed and properly 
reported on. Once a financial contribution to one of the instruments has been committed, the funds are 
transferred to a specifically created bank account of the financial institution (i.e. a fiduciary account). The 
financial institution may, depending on the instrument in question, use the funds on this fiduciary account 
to  provide  loans,  issue  debt  instruments,  invest  in  equity  instruments  or  cover  the  guarantee  calls. 
Proceeds from financial instruments have, as a general rule, to be reimbursed to the EU budget. 

The  risk  as  regards  these  financial  instruments  is  limited  to  a  ceiling  as  indicated  in  the  underlying 
agreements, which is the budgeted amount foreseen for the instrument. As the Commission often bears 
the  "first  loss  piece"  and  since  instruments  are  intended  to  finance  riskier  beneficiaries  (who  have 
difficulties in obtaining funding from commercial lenders), it is therefore likely that some losses to the EU 
budget will occur. 

72 

 
 
 
 
 
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Annual accounts of the European Union 2016 

The  following  classes  of  financial  assets  and  liabilities  are  not  measured  at  fair  value:  cash  and  cash 
equivalents, loans, exchange receivables and non-exchange recoverables, borrowings and other financial 
liabilities  measured  at  amortised  cost.  The  carrying  amount  of  those  financial  assets  and  liabilities  is 
considered as a reasonable approximation of their fair value. 

Borrowing and lending activities for financial assistance 

The borrowing and lending transactions, as well as related treasury management, are carried out by the 
EU  according  to  the  respective  Council  and  EP  Decisions,  if  applicable,  and  internal  guidelines.  Written 
procedure  manuals  covering  specific  areas  such  as  borrowings,  loans  and  treasury  management  have 
been developed and are used by the relevant operational units. As a general rule, there are no activities 
to compensate interest rate variations or foreign currency variations ("hedging" activities) carried-out as 
lending operations are generally financed by "back-to-back" borrowings, which thus do not generate open 
interest rate or currency positions. The application of the "back-to-back" character is checked regularly. 

Treasury 

The  rules  and  principles  for  the  management  of  the  Commission's  treasury  operations  are  laid  down  in 
the  Council  Regulation  609/2014  (amended  by  Council  Regulation  804/2016)  and  in  the  Financial 
Regulation and its rules of application. 

As a result of the above regulations, the following main principles apply: 

-  Own resources are paid by the Member States into accounts opened for this purpose in the name of 
the Commission with the Treasury or national central bank. The Commission may draw on the above 
accounts solely to cover its cash requirements. 

-  Own Resources are paid by Member States in their own national currencies, while the Commission's 

payments are mostly denominated in EUR. 

- 

- 

Bank accounts opened in the name of the Commission may not be overdrawn. This restriction does 
not apply to the Commission's own resource accounts in case of a default on loans contracted or 
guaranteed pursuant to EU Council regulations and decisions and under certain conditions in case the 
cash resource requirements are in excess of the assets of the accounts. 

Funds held in bank accounts denominated in currencies other than EUR are either used for payments 
in the same currencies or periodically converted in EUR. 

In  addition  to  the  own  resources  accounts,  other  bank  accounts  are  opened  by  the  Commission,  with 
central banks and commercial banks, for the purpose of executing payments and receiving receipts other 
than the Member State contributions to the budget.  

Treasury  and  payment  operations  are  highly  automated  and  rely  on  modern  information  systems. 
Specific procedures are applied to guarantee system security and to ensure segregation of duties in line 
with the Financial Regulation, the Commission’s internal control standards, and audit principles. 

A written set of guidelines and procedures regulates the management of the Commission's treasury and 
payment operations with the objective of limiting operational and financial risk and ensuring an adequate 
level  of  control.  They  cover  the  different  areas  of  operation  (for  example:  payment  execution  and  cash 
management,  cashflow  forecasting,  business  continuity,  etc.),  and  compliance  with  the  guidelines  and 
procedures is checked regularly. Additionally, information is exchanged between Directorate General for 
the  Budget  and  Directorate-General  for  Economic  and  Financial  Affairs  on  risk  management  and  best 
practices.  

Fines 

Provisionally cashed fines: deposits 

Amounts received before 2010 remain in bank accounts with banks specifically selected for the deposit of 
provisionally  cashed  fines.  The  selection  of  banks  is  conducted  in  compliance  with  tender  procedures 
defined by the Financial Regulation. Placement of funds with specific banks is determined by the internal 
risk management policy defining the credit rating requirements and the amount of funds which could be 

73 

 
 
 
 
 
Annual accounts of the European Union 2016 

placed  in  proportion  to  the  counterparty  equity.  Financial  and  operational  risks  are  identified  and 
evaluated and compliance with internal policies and procedures is checked regularly. 

Provisionally cashed fines: BUFI portfolio 

Fines  imposed  and  provisionally  cashed  from  2010  onwards  are  invested  in  a  specifically  created  fund, 
BUFI.  The  main  objectives  of  the  Fund  are  the  reduction  of  risks  associated  with  financial  markets  and 
the equal treatment of all fined entities by offering a guaranteed return calculated on the same basis. The 
asset  management  for  provisionally  cashed  fines  is  carried  out  by  the  Commission  in  accordance  with 
internal  asset  management  guidelines.  Procedural  manuals  covering  specific  areas  such  as  treasury 
management  have  been  developed  and  are  used  by  the  relevant  operational  units.  Financial  and 
operational risks are identified and  evaluated and  compliance with internal guidelines and procedures is 
checked regularly. 

The  objectives  of  the  asset  management  activities  are  to  invest  the  fines  provisionally  paid  to  the 
Commission in such a way as to: 

a)  ensure that the funds are easily available when needed, while 

b)  aiming at delivering, under normal circumstances, a return which on average is in line with the return 

of the BUFI Benchmark minus costs incurred, while preserving the nominal amount of the fines. 

Investments  are  restricted  essentially  to  the  following  categories:  term  deposits  with  Euro-area  Central 
Banks, Euro-area sovereign debt agencies, fully state-owned or state-guaranteed banks or supranational 
institutions,  and  bonds,  bills  and  Certificates  of  Deposit  issued  by  either  sovereign  or  supranational 
institutions. 

Bank guarantees 

Significant amounts of guarantees issued by financial institutions are held by the Commission in relation 
to  the  fines  it  imposes  on  companies  breaching  EU  competition  rules  (see  note  2.6.1.2).  These 
guarantees  are  provided  by  fined  companies  as  an  alternative  to  making  provisional  payments.  The 
guarantees  are  managed  in  compliance  with  the  internal  risk  management  policy.  Financial  and 
operational  risks  are  identified  and  evaluated  and  compliance  with  internal  policies  and  procedures  is 
checked regularly. 

Guarantee Fund for external actions 

The rules and principles for the asset management of the Guarantee Fund are laid out in the Convention 
between the Commission and the EIB dated 25 November 1994 and the subsequent amendments dated 
17/23 September 1996,  8 May 2002,  25 February 2008  and  9 November 2010.  This  Guarantee  Fund 
operates only in euros. It exclusively invests in this currency in order to avoid any foreign currency risk. 
Management  of  the  assets  is  based  upon  the  traditional  rules  of  prudence  adhered  to  for  financial 
activities. It is required to pay particular attention to reducing the risks and to ensuring that the managed 
assets can be sold or transferred without significant delay, taking into account the commitments covered. 

EFSI Guarantee Fund 

The EFSI Guarantee Fund was established by Regulation (EU) 2015/1017 of the European Parliament and 
of the Council of 25 June 2015. The rules and principles for the asset management of the Fund are laid 
out  in  the  Commission  Decision  C(2016)165  of  21  January  2016.  The  managed  assets  shall  provide 
sufficient  liquidity  in  relation  to  the  potential  guarantee  calls,  while  still  aiming  at  optimising  the  return 
and risk level that is compatible with maintaining a high degree of security and stability. 

74 

 
Annual accounts of the European Union 2016 

6.3.  CURRENCY RISK 

Financial instruments exposure of the EU to currency risk at year end – net position 

Financial assets 
Available for sale financial assets 
Financial assets at fair value 
through surplus or deficit 
Loans* 
Receivables and recoverables 
Cash and cash equivalents 

Financial liabilities 
Financial liabilities at fair value 
through surplus or deficit 
Payables 

Total 

Financial assets 
Available for sale financial assets 
Financial assets at fair value 
through surplus or deficit 
Loans* 
Receivables and recoverables 
Cash and cash equivalents 

Financial liabilities 
Financial liabilities at fair value 
through surplus or deficit 
Payables 

Total 

USD 

GBP 

DKK 

31.12.2016 
SEK 

EUR 

Other 

Total 

EUR millions 

 228 
 (49) 

 4 
 1 
 39 
 222 

 58 
– 

 0 
 593 
2 394 
3 045 

 14 
– 

– 
 51 
 428 
 493 

 42 
– 

– 
 81 
1 220 
1 342 

10 080 
 50 

 329 
10 888 
22 387 
43 734 

 21 
– 

 10 
 8 
2 117 
2 156 

10 442 
 0 

 343 
11 622 
28 585 
50 993 

 (100) 

– 

– 

– 

 100 

– 

 (1) 

 (1) 
 (101) 
 121 

 (5) 
 (5) 
3 040 

 (0) 
 (0) 
 493 

 (0) 
 (0) 
1 342 

(39 983) 
(39 883) 
3 851 

 (16) 
 (16) 
2 140 

(40 005) 
(40 005) 
10 987 

USD 

GBP 

DKK 

31.12.2015 
SEK 

EUR 

Other 

Total 

EUR millions 

 81 
– 

 5 
 10 
 36 
 132 

 76 
– 

 0 
 542 
1 785 
2 403 

 11 
– 

– 
 53 
 368 
 433 

 8 
– 

– 
 85 
1 287 
1 380 

9 416 
– 

 354 
9 555 
17 342 
36 667 

 28 
– 

 18 
 78 
 853 
 977 

9 620 
– 

 377 
10 324 
21 671 
41 992 

– 

– 

– 

– 

– 

– 

– 

 (1) 
 (1) 
 131 

 (2) 
 (2) 
2 401 

 0 
 0 
 433 

 (0) 
 (0) 
1 380 

(32 187) 
(32 187) 
4 480 

 (1) 
 (1) 
 976 

(32 191) 
(32 191) 
9 801 

* Excluding back-to-back loans for financial assistance. 

If  the  EUR  had  strengthened  against  other  currencies  by  10 %,  then  it  would  have  had  the  following 
impact: 

2016 
2015 

31.12.2016 
31.12.2015 

Economic result 

USD 
 (4) 
 (5) 

USD 
 (7) 
 (7) 

GBP 
 (272) 
 (212) 

Net assets 

GBP 
 (5) 
 (7) 

EUR millions 

SEK 
 (118) 
 (125) 

EUR millions 

SEK 
 (4) 
 (1) 

DKK 
 (43) 
 (38) 

DKK 
 (1) 
 (1) 

75 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
If the EUR had weakened against these currencies by 10 %, then it would have had the following impact: 

Annual accounts of the European Union 2016 

2016 
2015 

31.12.2016 
31.12.2015 

Economic result 

USD 
 5 
 6 

USD 
 9 
 9 

GBP 
 332 
 259 

Net assets 

GBP 
 6 
 8 

EUR millions 

SEK 
 145 
 152 

EUR millions 

SEK 
 5 
 1 

DKK 
 53 
 47 

DKK 
 2 
 1 

Borrowing and lending activities for financial assistance 

Most  financial  assets  and  liabilities  are  in  EUR,  so  in  these  cases  the  EU  has  no  foreign  currency  risk. 
However, the EU does give loans in USD through the financial instrument Euratom, which are financed by 
borrowings with an equivalent amount in USD (back-to-back operation). At the balance sheet date the EU 
has no foreign currency risk with regard to Euratom.  

Treasury 

Own  resources  paid  by  Member  States  in  currencies  other  than  EUR  are  kept  on  the  own  resources 
accounts, in accordance with the Own Resources Regulation. They are converted into EUR when they are 
needed  to  cover  for  the  execution  of  payments.  The  procedures  applied  for  the  management  of  these 
funds  are  dictated  by  the  above  referenced  regulation.  In  a  limited  number  of  cases,  these  funds  are 
directly used for payments to be executed in the same currencies. 

A number of accounts in EU currencies other than EUR, and in USD and CHF, are held by the Commission 
with  commercial  banks,  for  the  purpose  of  executing  payments  denominated  in  these  same  currencies. 
These accounts are replenished depending on the amount of payments to be executed, as a consequence 
their balances do not represent exposure to currency risk. 

When miscellaneous receipts (other than own resources) are received in currencies other than EUR, they 
are either transferred to Commission's accounts held in the same currencies, if they are needed to cover 
the  execution  of  payments,  or  converted  into  EUR  and  transferred  to  accounts  held  in  EUR.  Imprest 
accounts held in currencies other than EUR are replenished depending on the estimated short term local 
payments  needs  in  the  same  currencies.  Balances  on  these  accounts  are  kept  within  their  respective 
ceilings. 

Fines 

Provisionally cashed fines (deposits and BUFI portfolio) and bank guarantees 

Since all fines are imposed and paid in EUR, there is no foreign currency risk. 

Guarantee Fund for external actions 

The financial assets of this fund are in EUR so there is no currency risk. The loans subrogated to the EU 
as  result  of  calls  on  the  Fund  following  payment  defaults  by  a  loan  beneficiary  are  carried  out  in  their 
original  currency  and  therefore  expose  the  EU  to  currency  risk.  There  are  no  activities  to  compensate 
foreign  currency  variations  ("hedging"  activities)  due  to  uncertainty  relating  to  the  loans  repayment 
timing. 

EFSI Guarantee Fund 

The  EFSI  Guarantee  Fund  currently  operates  in  both  EUR  and  USD.  In  December  2016  the  first 
investments in USD denominated fixed-rate debt securities (US Treasuries) were undertaken with a view 
to  improve  returns  and  diversify  market  risk  through  exposure  to  the  US  market.  Currency  risk  is 
managed  through  entering  into  derivative  contracts  (foreign  exchange  forward  contracts)  hedging  the 
market  value  of  the  USD  investments  portfolio.  The  limit  for  maximum  unhedged  foreign  exchange 

76 

 
 
 
 
 
 
 
 
 
 
 
 
 
Annual accounts of the European Union 2016 

exposure is set at 1 % of the total portfolio value within the benchmark and annual strategy allocations. 
Thus,  upward  or  downward  movements  in  the  USD  investments'  market  value  above  or  below  the  1 % 
limit  would  trigger  a  rebalancing  trade  (a  new  forward  contract  with  the  same  or  opposite  direction), 
adjusting or reversing the hedged position accordingly. Readjustment of the hedge may also be prompted 
by movements of the EUR/USD exchange rate. 

6.4.  INTEREST RATE RISK 

The following table illustrates the interest rate sensitivity of available for sale financial assets assuming a 
possible change in interest rates of +/- 100 basis points (1 %). 

2016: Available for sale financial assets 

2015: Available for sale financial assets 

Borrowing and lending activities for financial assistance 

Increase (+) / 
decrease (-) in 
basis points 
+100 
-100 
+100 
-100 

EUR millions 
Effect on 
economic result 
and net assets 
 (291) 
 313 
 (206) 
 223 

Due  to  the  nature  of  its  borrowing  and  lending  activities,  the  EU  has  significant  interest-bearing  assets 
and liabilities. However, the interest rate risks that arise from borrowings are offset by equivalent loans 
in terms and conditions (back-to-back).  

Treasury 

The  Commission's  treasury  does  not  borrow  money;  so  as  a  consequence,  it  is  not  exposed  to  interest 
rate  risk.  Interest  is  however  calculated  on  balances  held  on  the  different  bank  accounts.  The 
Commission  has  therefore  put  in  place  measures  to  ensure  that  interest  earned  on  its  bank  accounts 
regularly reflects market interest rates, as well as their possible fluctuation.  

Accounts opened with Member States Treasuries for own resources receipts are non-interest bearing and 
free  of  charges.  Accounts  held  with  National  Central  Banks  may  be  remunerated  at  the  official  rates 
applied  by  each  institution.  As  some  of  the  remunerations  applied  to  these  accounts  may  currently  be 
negative, cash management procedures are in place to minimise balances kept on these accounts. 

In  addition,  own  resources  accounts  are  protected  from  any  impact  of  negative  interest  in  accordance 
with Council Regulation 804/2016. 

Overnight  balances  held  on  commercial  bank  accounts  earn  interest  on  a  daily  basis.  This  is  based  on 
variable market rates to which a contractual margin (positive or negative) is applied. The rates applied by 
commercial  banks  are  in  general  contractually  floored  at  zero.  As  a  result  no  risk  exists  that  the 
Commission earns interest at rates lower than market rates. 

Fines 

Provisionally cashed fines (deposits, BUFI portfolio) and bank guarantees 

Interest  earned  on  deposits  have  a limited  exposure  to  interest  rate  risk  due  to  a  duration  of less  than 
one year. The rest of the portfolio is invested in securities with an average duration of 2.6 years.  

Guarantee Fund for external actions 

The budget provisioned in the Guarantee Fund is invested in a portfolio of money market instruments and 
long term bonds with a total average portfolio duration of 3.59 years.  

77 

 
 
 
 
 
 
 
 
 
EFSI Guarantee Fund 

Annual accounts of the European Union 2016 

The  budget  provisioned  in  the  EFSI  Guarantee  Fund  is  invested  in  a  portfolio  of  money  market 
instruments and long term bonds with a total average portfolio duration of 3.5 years. 

6.5.  CREDIT RISK 

The  amounts  that  represent  the  EU's  exposure  to  credit  risk  at  the  end  of  the  reporting  period  are  the 
carrying amounts of the financial instruments as disclosed in note 2. 

Analysis of the age of financial assets that are not impaired 

Total 

55 477 
11 622 
 0 

67 099 
57 251 
10 324 
67 575 

Neither 
past due 
nor 
impaired 

55 476 
10 310 
 0 

65 786 
57 251 
8 672 
65 922 

EUR millions 

Past due but not impaired 

< 1 year 
 1 
 130 
– 

1-5 years 
– 
 909 
– 

> 5 years 
– 
 273 
– 

 131 
 0 
 120 
 120 

 909 
– 
1 384 
1 384 

 273 
– 
 148 
 148 

Loans 
Receivables and recoverables 
Financial assets at fair value 
through surplus or deficit 
Total at 31.12.2016 
Loans 
Receivables and recoverables 
Total at 31.12.2015 

Receivables and recoverables between 1 and 5 years include recoverables related to competition fines of 
EUR 870 million that are to a large extent covered by bank guarantees and the Commission has thus low 
exposure to a credit risk. These guarantees are provided by fined companies as an alternative to making 
provisional payments. 

Credit quality of financial assets that are neither past due nor impaired 

Counterparties with  
external credit rating 
Prime and high grade 
Upper medium grade 
Lower medium grade 
Non-investment grade 

Counterparties without 
external credit rating 
Group 1 
Group 2 

Total 

AFS* 

Financial 
assets at 
FVSD** 

31.12.2016 
Loans & 
Receivables 

EUR millions 

Cash 

Total 

6 451 
1 412 
1 056 
– 
8 920 

– 
– 
– 
8 920 

– 
– 
– 
– 
– 

 0 
– 
 0 
 0 

3 386 
23 826 
4 532 
27 724 
59 469 

21 990 
5 325 
 492 
 744 
28 552 

31 828 
30 563 
6 081 
28 468 
96 941 

6 238 
 79 
6 317 
65 786 

 33 
– 
 33 
28 585 

6 272 
 79 
6 351 
103 292 

78 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Annual accounts of the European Union 2016 

AFS* 

Loans & 
Receivables 

Cash 

Total 

31.12.2015 

EUR millions 

5 945 
1 087 
1 247 
 32 
8 310 

– 
– 
– 
8 310 

3 256 
23 818 
4 527 
29 371 
60 973 

4 855 
 95 
4 950 
65 922 

16 147 
4 503 
 263 
 732 
21 646 

 25 
– 
 25 
21 671 

25 349 
29 409 
6 037 
30 136 
90 930 

4 880 
 95 
4 975 
95 905 

Counterparties with  
external credit rating 
Prime and high grade 
Upper medium grade 
Lower medium grade 
Non-investment grade 

Counterparties without 
external credit rating 
Group 1 
Group 2 

Total 

*   Available for sale financial assets (excluding equity instruments and Unitary Fund). 
**  Financial assets at fair value through surplus or deficit. 

Not  included  in  the  above  table  are  available  for  sale  financial  assets  in  the  form  of  equity  instruments 
without  external  credit  rating.  The  four  risk  categories  mentioned  above  are  in  principle  based  on  the 
rating categories of external rating agencies and correspond to: 

 

Prime and high grade: Moody P-1, Aaa – Aa3; S&P A-1+, A-1, AAA – AA -; Fitch F1+, F1, AAA – 
AA- and equivalent 

  Upper medium grade: Moody P-2, A1 – A3; S&P A-2, A+ - A-; Fitch F2, A+ - A- and equivalent 
 

Lower medium grade: Moody P-3, Baa1 – Baa3, S&P A-3, BBB+ - BBB-; Fitch F-3, BBBB+ - BBB- 
and equivalent 

  Non-investment grade: Moody not prime, Ba1 – C; S&P B, C, BB+ - D; Fitch B, C, BB+ - D and 

equivalent 

The  EU  uses  these  external  agencies  rating  categories  as  a  reference  point  notably  for  financial 
instruments  and  commercial  banks,  but  may,  after  making  its  own  analysis  of  individual  cases,  keep 
amounts  in  one  of  the  above  risk  categories  even  though  one  or  more  of  the  above  mentioned  rating 
agencies  may  have  downgraded  the  corresponding  counterparty.  As  regards  non-rated  counterparties, 
group 1 relates to debtors without defaults in the past and group 2 relates to debtors with defaults in the 
past. 

The  amounts  displayed  above  under  loans  and  receivables  categorised  in  non-investment  grade  relate 
primarily to financial support loans disbursed by the Commission to Member States in financial difficulties 
and  recoverables  against  certain  Members  States  based  on  own  resources  regulations  or  other  legal 
basis. The amount under cash relates to own resources bank accounts opened in the  Treasury or in the 
central  banks  of  Member  States  to  hold  the  own  resources  contributions  as  foreseen  in  the  regulation. 
The Commission may draw on these accounts solely to cover cash requirements arising from execution of 
the budget. 

Borrowing and lending activities for financial assistance 

Exposure to credit risk is managed firstly by obtaining country guarantees in the case of Euratom, then 
through the Guarantee Fund for external actions (MFA & Euratom), then by the possibility of drawing the 
necessary funds from the Commission's own resources accounts with the Member States and ultimately 
through the Budget of the EU. 

The Own Resources legislation fixes the ceiling for own resources payments at 1.20 % of Member States' 
GNI  and  during  2016  0.89 %  was  actually  used  to  cover  payment  appropriations.  This  means  that  at 
31 December 2016 there existed an available margin of 0.31 % to cover these guarantees. To this end, 
the EU is entitled to call upon all the Member States to ensure compliance with the EU's legal obligation 
towards its lenders. 

79 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Treasury 

Annual accounts of the European Union 2016 

Most  of  the  Commission's  treasury  resources  are  kept,  in  accordance  with  Council  Regulation 
No 609/2014  on  own  resources,  in  the  accounts  opened  by  Member  States  for  the  payment  of  their 
contributions  (own  resources).  All  such  accounts  are  held  with  Member  States'  treasuries  or  national 
central banks. These institutions carry the lowest credit (or counterparty) risk for the Commission as the 
exposure  is  with  its  Member  States.  For  the  part  of  the  Commission's  treasury  resources  kept  with 
commercial banks, in order to cover the execution of payments, replenishment of these accounts is made 
on  a  just-in-time  basis  and  is  automatically  managed  by  the  treasury  cash  management  system. 
Minimum  cash  levels,  which  take  into  account  the  average  amount  of  daily  payments  executed  from  it, 
are kept on each account. As a consequence the total amount kept overnight on these accounts remains 
constantly at low levels (overall less than EUR 100 million on average, spread over 20 accounts) and so 
ensure  the  Commission's  risk  exposure  is  limited.  These  amounts  should  be  viewed  with  regard  to  the 
daily  overall  treasury  balances  which  fluctuated  in  2016  between  EUR 1 billion  and  EUR 30 billion,  and 
with  an  overall  amount  of  payments  made  from  Commission  accounts  in  2016  that  exceeds 
EUR 145 billion. 

In  addition,  specific  guidelines  are  applied  for  the  selection  of  commercial  banks  in  order  to  further 
minimise counterparty risk to which the Commission is exposed: 

- 

- 

- 

All commercial banks are selected by call for tenders. The minimum short term credit rating required 
for admission to the tendering procedures is Moody's P-1 or equivalent. A lower level may be 
accepted in specific and duly justified circumstances. 

The credit ratings of the commercial banks where the Commission has accounts are monitored on a 
daily basis.  

In delegations outside the EU, imprest accounts are held with local banks selected by a simplified 
tendering procedure. Rating requirements depend on the local situation and may significantly differ 
from one country to another. In order to limit risk exposure, balances on these accounts are kept at 
the lowest possible levels (taking into account operational needs), they are regularly replenished, and 
the applied ceilings are reviewed on a yearly basis. 

Fines 

Provisionally cashed fines: deposits 

Banks holding deposits for the fines provisionally cashed before 2010 are selected by tender procedure in 
compliance with the risk management policy which defines the credit rating requirements and the amount 
of funds which could be placed in proportion to the counterparty equity. 

For commercial banks that have been specifically selected for the deposit of provisionally cashed fines, a 
minimum  long-term  rating  A  (S&P  or  equivalent)  and  a  minimum  short  term  rating  A-1  (S&P  or 
equivalent) is  required  as  a  general  rule. Specific measures  are  applied  in  case  banks  in  this  group are 
subject  to  downgrade.  In  addition,  the  amount  deposited  with  each  bank  is  limited  to  a  certain 
percentage  of  its  own  funds,  which  varies  depending  on  the  rating  level  of  each  institution.  The 
calculation  of  such  limits  also  takes  into  account  the  amount  of  outstanding  guarantees  issued  to  the 
Commission  by  the  same  institution.  The  compliance  of  outstanding  deposits  with  the  applicable  policy 
requirements is reviewed regularly. 

Provisionally cashed fines: BUFI portfolio 

For sovereign  debt investments from  provisionally cashed fines imposed as from  2010,  the Commission 
takes  on  the  exposure  to  credit  risk.  The  highest  concentration  of  exposure  is  towards  France,  which 
represents  31 %  of  the  total  nominal  volume  of  the  portfolio.  The  five  countries  with  the  highest 
exposure  (France,  Italy,  Belgium,  Germany  and  Luxembourg)  represent  altogether  77 %  of  the 
investment portfolio. The weighted average credit rating of the portfolio is A (S&P or equivalent). 

Bank guarantees 

The risk management policy applied for the acceptance of such guarantees ensures a high credit quality 
for  the  Commission.  The  compliance  of  the  outstanding  guarantees  with  the  applicable  policy 
requirements is reviewed regularly. 

80 

 
 
 
 
Guarantee Fund for external actions 

Annual accounts of the European Union 2016 

The  treasury  portfolio’s  agreed  asset  management  guidelines  and/or  investment  strategy  define  certain 
limits  and  restrictions  in  order  to  limit  the  exposure  to  credit  risk  of  the  portfolio.  Such  limits  and 
restrictions  include  eligibility  criteria,  absolute  credit  limits  in  nominal  terms  depending  on  issuer 
category,  relative  concentration  limits  depending  on  issuer  category  and  concentration  limits  per  issue. 
All investments are rated at least investment grade. 

EFSI Guarantee Fund 

The asset management guidelines, risk and investment strategies define certain limits and restrictions in 
order to limit the exposure to credit risk of the portfolio which is generally limited to investment grade. 
The weighted average credit rating of the portfolio is A (S&P or equivalent). 

As  the  sole  counterparty  for  all  outstanding  currency  forwards  as  of  31 December 2016  is  the  Bank  for 
International  Settlements  (BIS),  no  credit  enhancements,  such  as  collateral,  netting  agreements,  or 
guarantees  are  put  in  place  as  of  this  date.  The  maximum  exposure  to  credit  risk  for  foreign  exchange 
derivatives having a positive fair value at the end of the reporting period is equal to the carrying amount 
on the balance sheet. 

6.6.  LIQUIDITY RISK 

Maturity analysis of financial liabilities by remaining contractual maturity 

Borrowings 
Payables 
Other 
Total at 31.12.2016 
Borrowings 
Payables 
Other 
Total at 31.12.2015 

< 1 year 

2 094 
40 005 
 189 
42 288 
7 218 
32 191 
 721 
40 130 

1-5 years 
18 084 
– 
 637 
18 721 
9 660 
– 
 513 
10 173 

> 5 years 
34 950 
– 
1 397 
36 346 
39 982 
– 
1 609 
41 591 

Financial liabilities at fair value through surplus or deficit  

Derivative receivable 
Derivative payable 
Total at 31.12.2016 

< 1 year 

 149 
 (150) 
 (1) 

1-5 years 
– 
– 
– 

> 5 years 
– 
– 
– 

EUR millions 
Total 

55 128 
40 005 
2 222 
97 355 
56 860 
32 191 
2 843 
91 894 

EUR millions 
Total 

 149 
 (150) 
 (1) 

Borrowing and lending activities for financial assistance 

The  liquidity  risk  that  arises  from  borrowings  is  generally  offset  by  equivalent  loans  in  terms  and 
conditions  (back-to-back  operations).  For  MFA  and  Euratom,  the  Guarantee  Fund  for  external  actions 
serves as a liquidity reserve (or safety net) in case of payment default and payment delays of borrowers. 
For  BOP,  the  Council  Regulation  431/2009  provides  for  a  procedure  allowing  sufficient  time  to  mobilise 
funds through the Commission's own resources accounts with the Member States. For EFSM, the Council 
Regulation 407/2010 provides for a similar procedure. 

Treasury 

EU  budget  principles  ensure  that  overall  cash  resources  for  a  given  year  are  always  sufficient  for  the 
execution of all payments.  In  fact, the total Member States contributions equal  the amount  of  payment 
appropriations  for  the  budgetary  year.  Member  States’  contributions,  however,  are  received  in  twelve 
monthly instalments throughout the year, while payments are subject to certain seasonality. Moreover, in 
accordance  with  the  Council  Regulation  609/2014  (on  the  methods  and  procedure  for  making  available 
own resources), Member States contributions relating to (amending) budgets approved after the 16th of 
a  given  month  (N)  only  become  available  in  month  N+2,  while  the  related  payment  appropriations  are 

81 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Annual accounts of the European Union 2016 

immediately available. In order to ensure that available treasury resources are always sufficient to cover 
the payments to be executed in  any  given month, procedures  regarding regular cash  forecasting are  in 
place,  and  own  resources  or  additional  funding  can  be  called  up  in  advance  from  Member  States  if 
needed,  up  to  certain  limits  and  under  certain  conditions.  Seasonality  of  expenditure  and  overall 
budgetary restrictions in recent years have resulted in the need for increased monitoring of the rhythm of 
payments  over  the  year.  In  addition  to  the  above,  in  the  context  of  the  Commission's  daily  treasury 
operations, automated cash management tools ensure that sufficient liquidity is available on each of the 
Commission's bank accounts, on a daily basis. 

Fines 

Provisionally cashed fines: BUFI portfolio 

The fund is managed according to the principle that the assets shall have a sufficient degree of liquidity 
and  mobilisation  in  relation  to  the  relevant  commitments.  The  portfolio  is  composed  of  mostly  highly 
liquid  securities  that  can  be  sold  to  meet  unexpected  cash  outflows.  In  addition  the  share  of  securities 
maturing within 1 year and floating rate notes is 33 %. 

Guarantee Fund for external actions 

The fund is managed according to the principle that the assets shall have a sufficient degree of liquidity 
and  mobilisation  in  relation  to  the  relevant  commitments.  The  fund  must  maintain  a  minimum  of 
EUR 100 million  in  a  portfolio  with  a  maturity  of  less  than  twelve  months  which  is  to  be  invested  in 
monetary  instruments.  As  at  31 December 2016  these  investments,  including  cash,  amounted  to 
EUR 197 million. Furthermore, a minimum of 20 % of the fund's nominal value shall comprise monetary 
instruments,  fixed-rate  bonds  with  a  remaining  maturity  of  no  more  than  one  year,  and  floating-rate 
bonds. As at 31 December 2016 this ratio stood at 20 %. 

EFSI Guarantee Fund 

The Guarantee Fund is managed according to the principle that the assets shall have a sufficient degree 
of liquidity and mobilisation in relation to the relevant commitments. The portfolio is composed of highly 
liquid  assets  that  can  be  sold  to  meet  unexpected  cash  outflows,  including  the  most  liquid  USD-
denominated  assets  –  US  Treasuries,  standing  at  15 %  of  the  total  investment  portfolio  as  of  the 
reporting date. In addition, the share of securities maturing within 1 year and floating rate notes is 23 %. 

The settlement of derivative contracts is gross and is based on their contractual maturity. Obligations are 
honoured via sales of USD-denominated assets and/or a swap transaction, whereby it is possible that a 
cash outflow arises due to foreign exchange differences. 

No  liquidity  management  is  necessary  with  regard  to  collateral/margin  requirements  as  the  current 
hedging  counterparty  accepts  to  operate  with  the  Commission  without  any  requirements  for 
collateral/margin calls. 

82 

 
 
Annual accounts of the European Union 2016 

7.  RELATED PARTY DISCLOSURES 

7.1.  RELATED PARTIES 

The  related  parties  of  the  EU  are  the  EU  consolidated  entities,  associates  and  the  key  management 
personnel  of  these  entities.  Transactions  between  these  entities  take  place  as  part  of  the  normal 
operations of the EU and as this is the case, no specific disclosure requirements are necessary for these 
transactions in accordance with the EU accounting rules. 

7.2.  KEY MANAGEMENT ENTITLEMENTS 

For the purposes of presenting information on related party transactions concerning the key management 
of the EU, such persons are shown here under five categories: 

Category  1:  the  Presidents  of  the  European  Council,  the  Commission  and  the  Court  of  Justice  of  the 
European Union 

Category 2: the Vice-president of the Commission and High Representative of the EU for Foreign Affairs 
and Security Policy and the other Vice-presidents of the Commission 

Category  3:  the  Secretary-General  of  the  Council,  the  Members  of  the  Commission,  the  Judges  and 
Advocates  General  of  the  Court  of  Justice  of  the  European  Union,  the  President  and  Members  of  the 
General  Court,  the President and  Members of  the European  Civil Service Tribunal,  the Ombudsman and 
the European Data Protection Supervisor 

Category 4: the President and Members of the European Court of Auditors 

Category 5: the highest ranking civil servants of the Institutions and Agencies 

A  summary  of  their  entitlements  is  given  below  –  further  information  can  be  found  in  the  Staff 
Regulations  published  on  the  Europa  website  which  is  the  official  document  describing  the  rights  and 
obligations of all officials of the EU. Key management personnel have not received any preferential loans 
from the EU. 

83 

 
2% + 
181.82 
397.29 
97.05 
269.56 
539.12 
N/A 

N/A 

N/A 

2% + 
181.82 
397.29 
97.05 
269.56 
539.12 
N/A 

N/A 

N/A 

Annual accounts of the European Union 2016 

KEY MANAGEMENT FINANCIAL ENTITLEMENTS 

Entitlement (per employee) 
Basic salary (per month) 

Category 1 
27 031.43 

Category 2 

Category 3 

Category 4 

Category 5 

24 484.99 - 
25 464.39 

19 587.99 - 
22 036.49 

21 155.03 - 
22 526.20 

12 455.10 - 
19 587.99 

EUR 

15% 

15% 

15% 

15% 

0-4%-16% 

Residential/Expatriation 
allowance  

Family allowances: 
Household (% salary) 

Dependent child 
Pre-school 
Education, or 
Education outside place of work 
Presiding judges allowance 

2% + 
181.82 
397.29 
97.05 
269.56 
539.12 
N/A 

2% + 
181.82 
397.29 
97.05 
269.56 
539.12 
N/A 

2% + 
181.82 
397.29 
97.05 
269.56 
539.12 
627.76 

Representation allowance 

1 464.87 

941.46 

627.76 

Annual travel costs 

N/A 

N/A 

N/A 

Transfers to Member State: 
Education allowance* 
% of salary* 
% of salary with no cc 
Representation expenses 

Taking up duty: 
Installation expenses 

Family travel expenses 
Moving expenses 
Leaving office: 
Resettlement expenses 

Family travel expenses 
Moving expenses 
Transition (% salary)** 
Sickness insurance 
Pension (% salary, before 
tax) 

Deductions: 
Tax on salary 
Sickness insurance  
(% salary) 
Special levy on salary 
Pension deduction 
Number of persons  
at year-end 

Yes 
5% 
max 25% 
Reimbursed 

Yes 
5% 
max 25% 
Reimbursed 

Yes 
5% 
max 25% 
Reimbursed 

Yes 
5% 
max 25% 
N/A 

Yes 
5% 
max 25% 
N/A 

54 062.86 

Reimbursed 
Reimbursed 

27 031.43 

Reimbursed 
Reimbursed 
40% - 65% 
Covered 
Max 70% 

48 969.98 - 
 50 928.78 
Reimbursed 
Reimbursed 

24 484.99 - 
25 464.39 
Reimbursed 
Reimbursed 
40% - 65% 
Covered 
Max 70% 

39 175.99 - 
 44 072.99 
Reimbursed 
Reimbursed 

19 587.99 - 
22 036.49 
Reimbursed 
Reimbursed 
40% - 65% 
Covered 
Max 70% 

42 310.07 - 
 45 052.39 
Reimbursed 
Reimbursed 

21 155.03 - 
22 526.20 
Reimbursed 
Reimbursed 
40% - 65% 
Covered 
Max 70% 

Reimbursed 

Reimbursed 
Reimbursed 

Reimbursed 

Reimbursed 
Reimbursed 
N/A 
Covered 
Max 70% 

8% - 45% 
1.7% 

8% - 45% 
1.7% 

8% - 45% 
1.7% 

8% - 45% 
1.7% 

8% - 45% 
1.7% 

7% 
N/A 
3 

7% 
N/A 
6 

7% 
N/A 
93 

7% 
N/A 
28 

6-7% 
9.8% 
112 

* With correction coefficient ("CC") applied. 

** Paid for the first 3 years following departure. 

84 

 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Annual accounts of the European Union 2016 

8. 

EVENTS AFTER THE BALANCE SHEET DATE 

At  the  date  of  signing  of  these  accounts,  except  for  the  matter  outlined  below,  no  material  issues  had 
come to the attention of or were reported to the Accounting Officer of the Commission that would require 
separate  disclosure  under  this  section.  The  accounts  and  related  notes  were  prepared  using  the  most 
recently available information and this is reflected in the information presented. 

On  29 March 2017  the  United  Kingdom  formally  announced  its  intention  to  leave  the  European  Union, 
thus activating Article 50 of the Treaty on European Union. In accordance with this article as well as the 
European  Council  guidelines  on  the  financial  agreement  and  negotiating  directives  provided  by  the 
Council, the EU shall conclude an agreement with the United Kingdom, setting out the arrangements for 
its withdrawal. At the time of the signing of these accounts, the negotiation process has just begun and 
there is no impact on the financial position of the EU at 31 December 2016. 

85 

 
 
Annual accounts of the European Union 2016 

9. 

SCOPE OF CONSOLIDATION 

A. CONTROLLED ENTITIES (52) 
1. Institutions and consultative bodies (11) 
European Parliament 
European Council 
European Commission 
European Court of Auditors 
Court of Justice of the European Union 
European External Action Service 

European Data Protection Supervisor 
European Economic and Social Committee 
European Ombudsman 
Committee of the Regions 
Council of the European Union 

2. EU Agencies (39) 
2.1. Executive Agencies (6) 
Education, Audiovisual & Culture Executive Agency  Executive Agency for Small and Medium-sized 

Consumers, Health, Agriculture and Food 
Executive Agency 
Research Executive Agency 

2.2. Decentralised Agencies (33) 
European Maritime Safety Agency 
European Medicines Agency 
European GNSS Supervisory Authority 
European Chemicals Agency 
Fusion for Energy (European Joint Undertaking for 
ITER and the Development of Fusion Energy) 
Eurojust 
European Institute for Gender Equality 
European Agency for Safety and Health at Work 
European Centre for Disease Prevention and 
Control 
European Environment Agency 
European Centre for the Development of 
Vocational training 
European Agency for Cooperation of Energy 
Regulators 
European Banking Authority 
European Asylum Support Office 
Office for the Body of European Regulators for 
Electronic Communication 
European Agency Border and Coast Guard Agency 
(Frontex) 
EU-LISA (European Agency for the operational 
management of large-scale IT systems in the area 
of freedom, security and justice) 

3. Other controlled entities (2) 
European Coal and Steel Community (in 
liquidation) 

B. ASSOCIATES (1) 
European Investment Fund  

Enterprises 
Innovation & Networks Executive Agency 

European Research Council Executive Agency 

European Food Safety Authority 
European Railway Agency 
Community Plant Variety Office 
European Fisheries Control Agency 
European Monitoring Centre for Drugs and Drug 
Addiction 
European Union Intellectual Property Office 
European Police Office (EUROPOL) 
European Aviation Safety Agency 
European Network and Information Security 
Agency 
European Union Agency for Fundamental Rights 
European Insurance and Occupational Pensions 
Authority 
Translation Centre for the Bodies of the European 
Union 
European Securities and Markets Authority 
European Training Foundation 
European Foundation for the Improvement of 
Living and Working Conditions 
European Union Agency for Law Enforcement 
Training (CEPOL) 

European Institute of Innovation and Technology 

86 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
MINOR ENTITIES 

Annual accounts of the European Union 2016 

The  entities  listed  below  have  not  been  consolidated  using  the  equity  method  into  the  2016  EU 
consolidated financial statements on the basis of immateriality: 

Bio Based Industries Joint Undertaking  

Bio  Based  Industries  is  a  Public-Private  Partnership  (PPP)  between  the  EU  and  the  Bio-based  Industries 
Consortium (BIC). The BBI is dedicated to realising the European bioeconomy potential, turning biological 
residues  and  wastes  into  greener  everyday  products  through  innovative  technologies  and  biorefineries, 
which are at the heart of the bioeconomy. 

Clean Sky Joint Undertaking 

Clean  Sky  is  the  largest  European  research  programme  developing  innovative,  cutting-edge  technology 
aimed at reducing CO2, gas emissions and noise levels produced by aircraft. Funded by the EU’s Horizon 
2020  programme,  Clean  Sky  contributes  to  strengthening  European  aero-industry  collaboration, global 
leadership and competitiveness. 

Innovative Medicines Initiative  Joint Undertaking (IMI) 

IMI  is  Europe's  largest  public-private  initiative  aiming  to  speed  up  the  development  of  better  and  safer 
medicines  for  patients.  IMI  is  a  joint  undertaking  between  the  European  Union  and  a  pharmaceutical 
industry association. 

Electronic Components and Systems for European Leadership (ECSEL) Joint Undertaking (amalgamation 
of the former ARTEMIS & ENIAC JUs)  

ECSEL  is  a  PPP  in  electronic  components  and  systems,  bridging  the  gap  between  research  and 
exploitation, aligning strategies to increase European and national investments, and building an advanced 
ecosystem. 

Fuel Cells Hydrogen Joint Undertaking (FCH) 

FCH  is a PPP supporting research,  technological  development and demonstration (RTD) activities in  fuel 
cell and hydrogen energy technologies in Europe. Its aim is to accelerate the market introduction of these 
technologies, realising their potential as an instrument in achieving a carbon-lean energy system. 

Single European Sky ATM Research Joint Undertaking (SESAR) 

SESAR is a PPP responsible for the modernisation of the European air traffic management (ATM) system 
by coordinating and concentrating all ATM relevant research and innovation efforts in the EU. 

Shift2Rail Joint Undertaking 

Shift2Rail  is  the  first  European  rail  joint  technology  initiative  to  seek  focused  research  and  innovation 
(R&I) and market-driven solutions by accelerating the integration of new and advanced technologies into 
innovative rail product solutions.  

The annual accounts of the above entities are publicly available on their respective websites. 

87 

 
 
Annual accounts of the European Union 2016 

FINANCIAL STATEMENT DISCUSSION AND 
ANALYSIS 

FINANCIAL YEAR 2016 

It should be noted that due to the rounding of figures into millions of euros, some financial data in the 
tables below may appear not to add up. 

88 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Annual accounts of the European Union 2016 

The  objective  of  this  Financial  Statement  Discussion  and  Analysis  (FSDA)  is  to  assist  readers  to 
understand  the  financial  position,  financial  performance  and  cash  flows  presented  in  the  consolidated 
financial statements of the EU. The information presented in this FSDA have not been audited. 

1. 

CONSOLIDATED FINANCIAL STATEMENTS OF 
THE EU: FINANCIAL SITUATION 2016 

1.1.  REVENUE 

The majority of revenue of the EU institutions and bodies are revenues from non-exchange transactions. 
The table below provides an overview of the main categories of these revenues. 

Five year trend of revenue from non-exchange transactions in EUR millions 

160 000

140 000

120 000

100 000

80 000

60 000

40 000

20 000

Recovery of expenses

Fines

VAT

TOR

GNI resources

-
2012

2013

2014

2015

2016

The  main  points  to  note  regarding  the  movement  in  revenue  from  non-exchange  transactions  as 
compared to 2015 are: 

 

 

a  decrease  of  VAT  revenue  of  EUR 2.5 billion  mainly  due  to  the  reduced  call  rate  of  0.15 %  for 
Germany, the Netherlands and Sweden, which was applicable following the entry into force of the 
own resource decision (ORD) 2014 in 2016; and 

a  significant  increase  in  revenues  from  competition  fines  of  EUR 3.3 billion  mainly  due  to  fines 
imposed in 2016 in the truck and banking sectors. 

Recovery  of  expenses  represent  recovery  orders  issued  by  the  Commission  that  are  cashed  or  offset 
against  subsequent  payments  recorded  in  the  Commissions  accounting  system  made  so  as  to  recover 
expenditure previously paid out from the EU budget. 

1.2. 

EXPENSES 

Expenses were, being EUR 144.5 billion, at a much lower level than last year (2015: EUR 155.9 billion). A 
decrease of EUR 3.7 billion was noted for the European Regional Development Fund (ERDF) and Cohesion 
Fund (CF), which was due to less expenses incurred relating to the previous programming period (2007-
2013) combined with the slow start of the implementation of the programming period 2014-2020. For the 

89 

 
 
 
Annual accounts of the European Union 2016 

same reason expenses under European Agricultural Fund for Rural Development (EAFRD) and other rural 
development instruments also decreased by EUR 3.7 billion. 

The main expense items (EUR 102.8 billion) are transfer payments under the shared management mode. 
The  main  funds  are:  the  European  Agricultural  Guarantee  Fund  (EAGF),  the  EAFRD  and  other  rural 
development instruments, ERDF and CF and the European Social Fund (ESF). In the financial year 2016 
these made up almost 71.1 % of total expenses.  

EAGF

EAFRD

ERDF / CF

ESF

9% 

44% 

35% 

12% 

Expenses  incurred  under  direct  management  represent  the  budget  implementation  by  the  Commission, 
executive  agencies  and  by  trust  funds.  Also  included  under  direct  management  are  administrative 
expenses of all EU institutions and agencies. Under indirect management the budget is implemented by 
EU  agencies,  EU  bodies,  third  countries,  international  organisations  and  other  entities.  Overall,  the 
expenses  incurred  under  direct  and  indirect  management  made  up  about  16.2 %  of  total  expenses 
(EUR 23.4 billion) and remained stable as compared to the previous financial year. 

The EU also recognises future payment obligations as expenses that are not yet shown in the cash-based 
budgetary accounts. They are in particular shown under payables and accrued charges for agriculture and 
rural development and under pension and employee benefits liabilities relating to pension rights acquired 
by  Commissioners,  MEPs and staff and lead to negative  net  assets  (these  payments will  be financed by 
future budgets). 

1.3.  ASSETS 

EUR 163 billion assets on the consolidated balance sheet of the EU 

1% 

6% 

7% 

2% 

26% 

34% 

6% 

18% 

90 

Loans

Available for sale financial assets

Cash and cash equivalents

Pre-financing

Other advances to Member States

Receivables and recoverables

Property, Plant & Equipment

Other

 
 
 
Annual accounts of the European Union 2016 

The most significant items on the asset side of the balance sheet are financial assets (loans, available for 
sale financial assets, cash) and pre-financing amounts, which make up almost 84 % of the assets of the 
EU.  The  amount  of  loans  fell  by  EUR 1.8 billion  to  EUR 55.5 billion  whereas  the  amount  of  available  for 
sale financial instruments financed from the EU budget (budgetary instruments) increased again by about 
EUR 455 million  (2015:  EUR 460 million).  Included  on  the  asset  side  under  'Space  assets'  are  assets 
concerning the Copernicus and Galileo programme (EUR 3.3 billion). Assets relating to Galileo have been 
moved  from  assets  under  construction  to  fixed  assets  following  the  declaration  of  the  Galileo  initial 
services on 15 December 2016. 

In general, the EU institutions and bodies strive to keep the amounts held as cash and cash equivalents 
at  a  low  level.  The  high  cash  balance  of  EUR 28.6 billion  at  year-end  is  due  to  the  following  main 
elements: 

  As regards own resources, the end of year balance includes a total net amount of EUR 7.7 billion 
to  be  returned  to  Member  States  in  early  2017  as  result  of  amending  budgets  adopted  late  in 
2016. In addition, advances on own resources amounting to EUR 1.5 billion were received in the 
final days of 2016. 

  A  significant  amount  of  fines  imposed  by  the  Commission  for  breach  of  competition  rules  of 
EUR 4.3 billion were definitively cashed in 2016 and are part of the year-end treasury balance. 

 

The  treasury  balance  also  includes  the  assigned  revenue  and  payment  appropriations  not  spent 
by the end of 2016 of EUR 11 billion. 

Pre-financing 

It  should  be  noted  that  the  level  of  pre-financing  is  significantly  influenced  by  the  MFF  cycle  –  for 
example at the beginning of an MFF period one can expect large advances to be paid to Member States 
under cohesion policy. The Commission makes every effort to ensure that the levels of pre-financing are 
maintained at an appropriate level. A balance has to be struck between ensuring sufficient funding for the 
projects and the timely recognition of expenditure. 

The total pre-financing (excluding other advances to Member States and contributions to the trust funds 
Bekou and Africa) on the EU balance sheet amounts to EUR 41.6 billion (2015: EUR 40 billion), almost all 
of which relates to Commission activities. Some 64 % of the Commission's pre-financing concerns shared 
management,  which  means  that  the  implementation  of  the  budget  is  delegated  to  Member  States  (the 
Commission retains a supervisory role). 

Commission pre-financing by management mode 

Indirect 
management 
16% 

Direct 
management 
20% 

Shared 
management 
64% 

The  most  significant  pre-financing  amount  under  shared  management  mode  relates  to  ERDF  &  CF 
(EUR 15.1 billion). 

Long-term  pre-financing  has  decreased  by  EUR 8.3 billion  while  short-term  pre-financing  increased  by 
EUR 9.9 billion. This movement of pre-financing amounts is due to the fact that the programming period 
2007-2013 is in its closing phase and thus more amounts become due within twelve months. Concerning 
the  programming  period  2014-2020,  the  initial  pre-financing  paid  is  booked  as  non-current,  while  the 
annual pre-financing is booked as current. 

91 

 
 
 
FINANCIAL INSTRUMENTS 

Annual accounts of the European Union 2016 

The following items are shown in accounting terms as financial instruments in the consolidated financial 
statements of the EU: 

 

 

 

Financial Instruments financed by the EU budget; 

Financial assets held in guarantee funds for budgetary guarantees; and 

Loans and related borrowings for financial assistance programmes. 

Financial instruments financed by the EU budget 

The significance and volume of financial instruments financed by the EU budget under direct and indirect 
management  increases  from  year  to  year.  The  basic  concept  behind  this  approach,  in  contrast  to  the 
traditional method of budget implementation by giving grants and subsidies, is that for each euro spent 
from  the  budget  via  financial  instruments,  the  final  beneficiary  receives  more  than  EUR  1  as  financial 
support due to the leverage effect. This use of the EU budget aims at maximising the impact of the funds 
available.  Financial  instruments  financed  by  the  EU  budget  exist  in  the  form  of  guarantee  instruments, 
equity  instruments  and  loan  instruments  -  see  the  overview  by  MFF  below.  Assets  held  in  these 
instruments  are  either  kept  in  cash  and  cash  equivalents  or  invested  in  equity  instruments  and  debt 
securities shown as available for sale financial assets in the consolidated financial statements of the EU. 

Available for sale financial assets of financial instruments financed by the EU budget (year-end value) 

EUR millions 

4 000

3 500

3 000

2 500

2 000

1 500

1 000

 500

-

2012

2013

2014

2015

2016

The following tables provide an overview of financial instruments financed by the EU budget per MFF and 
their values at 31 December 2016: 

Related to more than one MFF 

Assets 

Liabilities 

Guarantees 

EUR millions 

Guarantee and risk-sharing instruments: 

Guarantee Facility under the Western Balkan (EDIF) 

Equity instruments: 

European Fund for Southeast Europe (EFSE)  

Enterprise Expansion Fund (ENEF) 

Enterprise Innovation Fund (ENIF) 

Green for Growth Fund to the Eastern Neighbourhood Region 

Microfinance Initiative for Asia Debt Fund 

MENA Fund for Micro-, Small and Medium Enterprises (SANAD) 

Total  

29 

29 

119 

10 

20 

51 

9 

9 

218 

247 

(17) 

(17) 

- 

- 

- 

- 

- 

- 

- 

(17) 

-* 

-  

- 

- 

- 

- 

- 

- 

- 

- 

92 

 
 
 
 
 
 
 
 
  
  
 
 
  
  
Annual accounts of the European Union 2016 

 MFF 2014-2020 

Guarantee and risk-sharing instruments: 

Horizon 2020 – InnovFin Loan & Guarantee Service for R&I 

Horizon 2020 – InnovFin SME Guarantee 

Connecting Europe Facility Debt Instrument (CEF DI)** 

COSME Loan Guarantee Facility 

Employment and Social Innovation 

ElectriFI 

Cultural and Creative Sector Guarantee Facility (CCS LGF) 

EU Deep and Comprehensive Free Trade Area Facility 

Student Loan Guarantee Facility 

Natural Capital Financing Facility  

SEMED MSME Financial Inclusion Programme 

Risk Capital Facility for the Southern Neighbourhood Countries 

Women in Business Programme in the Eastern Partnership 

Private Finance for Energy Efficiency Instrument (PF4EE) 

Support for Mongolian Economic Diversification 

Equity instruments: 

Horizon 2020 InnovFin Equity Facility for R&I 

COSME – Equity Facility for Growth 

Total  

MFF Prior to 2014 

Guarantee and risk-sharing instruments: 

Risk Sharing Finance Facility (RSFF) 

SME Guarantee Facility under CIP 

Multi Annual Program (MAP) for Enterprises 

European Progress Microfinance Mandate  

SME Guarantee Facility 

Equity instruments:  

High Growth and Innovative SME Facility under CIP 

Multi Annual Framework Programme Equity Facility 

European Energy Efficiency Fund  

European Progress Microfinance Facility (PMF) for EaSI 

Global Energy Efficiency and Renewable Energy Fund  

Marguerite Fund 

European Technology Start up Facility 1998 (ETF) 

Technology Transfer Pilot projects 

Loan / Equity / Technical assistance instruments: 

Instrument of economic and financial cooperation MEDA 

European Neighbourhood and Partnership Instrument (ENPI) 

SME Support Loan 

Total  

Overall Total 

Assets 

Liabilities 

Guarantees 

EUR millions 

698 

467 

493 

160 

50 

30 

6 

9 

16 

11 

15 

20 

5 

18 

2 

(8) 

(99) 

(1) 

(156) 

(16) 

- 

(1) 

0 

(2) 

- 

(1) 

- 

- 

0 

- 

(550) 

(371) 

(465) 

-* 

-* 

- 

-* 

- 

* 

- 

0 

- 

- 

(3) 

- 

1 999 

(285) 

(1 389) 

229 

51 

280 

(4) 

(3) 

(7) 

- 

- 

- 

2 279 

(292) 

(1 389) 

Assets 

Liabilities 

Guarantees 

839 

100 

25 

10 

17 

991 

423 

196 

100 

75 

74 

54 

11 

1 

933 

202 

142 

18 

363 

2 286 

4 812 

(88) 

(190) 

(34) 

(7) 

(14) 

(711) 

* 

* 

* 

* 

(333) 

(711) 

(3) 

(0) 

- 

- 

- 

- 

(0) 

(0) 

(3) 

2 

6 

- 

(8) 

(344) 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

(711) 

(652) 

(2 101) 

*   The risk taken by the EU is fully covered by the provisions made.  
** Includes the merger of Loan Guarantee Instrument for TEN-T Projects and Project Bond Initiative. 

93 

 
 
 
 
 
 
  
  
 
 
  
  
 
 
 
 
 
 
  
  
 
 
  
  
 
 
  
  
 
 
 
 
Annual accounts of the European Union 2016 

Financial assets held in guarantee funds for budgetary guarantees 

The  Commission  has  set-up  guarantee  funds  to  cover  budgetary  guarantees  (see  note  4.1.1  of  the 
consolidated  financial  statements)  given  to  the  EIB  group.  These  guarantee  funds  are  provisioned  by 
payments  from  the  EU  budget  so  as  to  provide  a  liquidity  cushion  against  potential  losses  from 
guaranteed operations. Payments to the guarantee funds are invested in financial instruments including 
debt securities, cash and term deposits. At 31 December 2016, the Commission holds financial assets in 
the: 

  Guarantee Fund for external actions of EUR 2.3 billion; and 

  EFSI Guarantee Fund of EUR 1 billion. 

The EFSI Guarantee Fund started its operations in 2016. 

Loans and related borrowings for financial assistance programmes 

The  EU  is  empowered  by  the  EU  Treaty  to  undertake  borrowing  operations  to  mobilise  the  financial 
resources  necessary  to  fulfil  specific  mandates.  The  Commission,  acting  on  behalf  of  the  EU,  currently 
operates  three  main  programmes:  European  Financial  Stabilisation  Mechanism  (EFSM),  the  Balance  of 
Payments  (BOP)  assistance  and  the  Macro-financial  assistance  (MFA),  under  which  it  may  grant  loans. 
The capital required to fund the EU lending is raised on the capital markets or with financial institutions.  

The MFA loans are granted to partner countries outside the EU, outstanding loans at 31 December 2016 
total EUR 2 947 million at nominal amounts.  

EFSM 

In 2014 the Irish and the Portuguese financial assistance programmes under EFSM expired and thus no 
additional loans can be drawn. In January 2016, Portugal officially requested for the extension of its first 
EFSM  loan  repayment  maturity  due  on  3 June 2016.  The  EUR 4.75 billion  instalment  was  refinanced  by 
three new tranches of EUR 1.5 billion, EUR 2.25 billion and EUR 1 billion, with maturities falling in 2023, 
2031  and  2036,  respectively.  This  is  the  main  reason  for  the  decrease  of  short-term  loans/borrowings 
and an increase of long-term loans/borrowings on the 2016 balance sheet. 

BOP 

The BOP assistance programme for Hungary expired in 2010 and both assistance programmes for Latvia 
and  Romania  expired  in  2012.  Additionally,  the  two  precautionary  assistance  programmes  for  Romania 
expired in 2013 and 2015 respectively without being drawn down. In April 2016, Hungary reimbursed its 
last outstanding instalment of EUR 1.5 billion. 

Overview of loans granted for financial assistance at nominal amounts: 

BOP 

EFSM* 

EUR billions 

TOTAL 

Total granted 

Hungary  Latvia  Romania 
5.0** 

3.1 

6.5 

Total disbursed at 31.12.2016 

5.5 

2.9 

5.0 

14.6 

13.4 

(5.5) 

(2.2) 

(1.5) 

(9.2) 

Total 

Ireland 

Portugal 

Total 

22.5 

22.5 

- 

26.0 

24.3 

- 

48.5 

46.8 

- 

63.1 

60.2 

(9.2) 

Total repaid at 31.12.2016 
Outstanding amount at 
31.12.2016 
*   Without re-financing transactions.  
**   Excluding precautionary assistance. 

- 

0.7 

3.5 

4.2 

22.5 

24.3 

46.8 

51.0 

94 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Annual accounts of the European Union 2016 

1.4. 

LIABILITIES 

EUR 235 billion liabilities on the consolidated balance sheet of the EU 

2% 

29% 

29% 

Pension & other employee benefits

Borrowings

Payables

17% 

23% 

Other liabilities

Accrued charges & deferred income

The liability side consists primarily of four key items: The pension and other employee benefits liabilities, 
borrowings,  payables and accrued  charges.  The  biggest  change  as compared  to 2015  is the increase  of 
payables by almost EUR 8 billion mainly due to a better implementation of EAGF (i.e. the payments at the 
level  member  states)  in  2016  compared  to  2015  –  see  note  2.12  of  the  consolidated  financial 
statements. 

Total cost claims and invoices received and recognised under the payables heading of the balance sheet 

EUR millions 
30 000

25 000

20 000

15 000

10 000

5 000

-

2013

2014

2015

2016

Net assets 

The  excess  of  liabilities  over  assets  does  not  mean  that  the  EU  institutions  and  bodies  are  in  financial 
difficulties, rather it means that certain liabilities will be funded by future annual budgets. Many expenses 
are  recognised  under  accrual  accounting  rules  in  2016  although  they  may  be  actually  paid  in  2017  or 
later  and  funded  using  future  budgets  and  the  related  revenues  will  only  be  accounted  for  in  future 
periods.  The  most  significant  amounts  to  be  highlighted  are  the  EAGF  activities  (paid  in  2017)  and  the 
employee benefits liability (to be paid over the next 30 plus years). 

95 

 
 
 
Annual accounts of the European Union 2016 

2. 

PROTECTION OF THE EU BUDGET 

Financial corrections and recoveries overview for 2016 

An important consideration in implementing the EU budget is the need to ensure the proper prevention or 
detection and subsequent correction of system weaknesses leading to errors, irregularities and fraud. The 
Court provides in its annual report a statement of assurance on the legality and regularity of transactions 
underlying  the  annual  accounts,  as  well  as  the  material  level  of  error  in  payments.  The  statement  of 
assurance accompanies the EU annual accounts in its publication in the Official Journal. 

The Commission's protective actions mitigate the impact of these errors through two main mechanisms: 

(1)   preventive  mechanisms  (e.g.  ex-ante  controls,  interruptions  and  suspensions  of  payments); 

and 

(2)   corrective  mechanisms  (primarily  financial  corrections  imposed  on  or  agreed  with  Member 

States and, to a lesser extent, recoveries from recipients of EU payments). 

Under  the  shared  management  mode  (agricultural  spending  and  structural  actions),  Member  States  are 
primarily  responsible  throughout  the  expenditure  life  cycle  for  ensuring  that  expenditure  paid  out  from 
the EU budget is legal and regular. 

The corrective actions, i.e. financial corrections and recoveries, arise following the supervision and checks 
made by both the Commission and also, in the case of shared management expenditure, Member States 
on  the  eligibility  of  expenditure  funded  by  the  EU  budget.  When  deciding  on  the  amount  of  a  financial 
correction  or  recovery,  the  Commission  takes  into  account  the  nature  and  seriousness  of  the  breach  of 
applicable  law  and  the  financial  implications  for  the  EU  budget,  including  cases  of  deficiencies  in 
management and control systems. Most corrections are done after payment. 

Financial corrections and recoveries process: 

Ex-post controls 
and audits  

In progress  

Confirmed 

Implemented  

Financial  corrections  and  recoveries  are  presented  at  two  main  stages  of  the  process.  Both  stages  may 
take place in the same year or in different years: 

(1)  Financial  corrections  and  recoveries  at  confirmation  stage:  These  amounts  have  been  either 
agreed  by  the  Member  State  concerned  or  adopted  by  a  Commission  decision.  In  2016,  the  total 
financial  corrections  and 
(2015: 
EUR 3 499 million). 

recoveries  confirmed  amounted 

to  EUR 3 777 million 

Financial corrections and recoveries confirmed in 2016 - breakdown per policy areas 

EUR millions 

 173 

 4 

- 5 

 14 

 309 

 389 

1 387 

 102 

 706 

 700 

96 

EAGF

Rural Development

ERDF

Cohesion Fund

ESF

FIFG/EFF

EAGGF Guidance

Internal policies

External policies

Administration

 
 
 
 
Annual accounts of the European Union 2016 

(2)  Financial  corrections  and  recoveries  at  implementation  stage:  These  amounts  represent  the 
final  step  of  the  process  whereby  the  observed  situation  of  undue  expenditure  is  definitively 
corrected.  Several  implementation  mechanisms  are  foreseen  in  the  sector-based  regulatory 
frameworks.  In  2016,  the  total  financial  corrections  and  recoveries  implemented  amounted  to 
EUR 3 389 million  (2015:  EUR 3 853 million).  The  implementation  of  financial  corrections  and 
recoveries may  take  a number  of  years  mainly  due to instalment or deferral  decisions granted  to 
Member  States  under  the  agricultural  policy.  Under  the  Cohesion  policy  the  legal  framework 
foresees the implementation at or after the closure of the programming period.  

Financial corrections and recoveries implemented in 2016 - breakdown per policy areas 

EUR millions 

 175 

 4 

 67 

 17 

 318 

 235 

 1 

 623 

1 662 

 286 

EAGF

Rural Development

ERDF

Cohesion Fund

ESF

FIFG/EFF

EAGGF Guidance

Internal policies

External policies

Administration

3.  MANAGEMENT OF RISKS AND UNCERTAINTIES 

IN EU BUDGET IMPLEMENTATION 

3.1.  MACRO-ECONOMIC ENVIRONMENT 

The macro-economic environment of the EU7 has an impact on the ability of EU Member states to meet 
their  funding  obligations  towards  the  EU  institutions  and  bodies  and  thus  on  the  ability  of  the  EU  to 
continue implementing EU policies.  

There  is  a  high  degree  of  uncertainty  surrounding  the  global  economic  outlook  at  present.  This  comes 
after an already difficult 2016, in which the European economy had to cope with numerous international 
and  domestic  challenges  including  the  lowest  pace  of  global  and  trade  growth  since  2009,  geopolitical 
tensions, terrorist attacks in several Member States, stressed banking sectors, UK's vote to leave the EU, 
and a mounting backlash against globalisation. So far though, the European economy has proved to be 
resilient  and  has  stayed  the  course  of  economic  growth  and  job  creation.  EU  GDP  growth  rose  towards 
the  end  of  2016  and  looks  to  have  maintained  its  momentum  into  2017.  This  resilience  has  been 
supported  by  a  number  of  well-known  favourable  factors,  including  the  relatively  low  oil  price,  the  past 
depreciation of the euro, accommodative monetary policies and a broadly neutral fiscal policy stance. The 
implementation of structural reforms in some Member States has also helped to underpin the recovery, 
particularly  in  the  labour  market.  Private  consumption  has  remained  the  main  growth  driver  while 
investment has continued to disappoint. This persistent weakness in investment casts a shadow of doubt 
over  the  sustainability  of  the  recovery  and  the  economy's  potential  growth.  Uncertainty  is  rising  to  an 
extraordinarily high level, driven by the uncertain outcome of the UK's decision to withdraw from the EU. 

Overall, after 1.7 % in 2016, euro area GDP growth is set to ease somewhat this year to 1.6 % and then 
pick up slightly to 1.8 % in 2018. This steady but moderate expansion should remain driven by domestic 

7   See for more information: European Commission "European Economic Forecast Winter 2017". 

97 

 
 
 
                                                 
Annual accounts of the European Union 2016 

demand.  Global  GDP  growth  is  expected  to  have  reached  a  low  point  in  2016  and  is  projected  to 
strengthen  this  year  and  next.  Growth  outside  the  EU  is  projected  to  pick  up  gradually  from  3.2 %  in 
2016 to 3.7 % in 2017 and 3.9 % in 2018. 

3.2.  BUDGETARY CONTINGENT LIABILITIES FOR 

FINANCIAL ASSISTANCE 

The EU borrowing and lending activities for financial assistance programmes are non-budget operations. 
In general, funds raised are on-lent back-to-back to the beneficiary country, i.e. with the same coupon, 
maturity  and  amount.  Notwithstanding  the  back-to-back  methodology,  the  debt  service  of  the  funding 
instruments is a legal obligation of  the EU, which will  ensure that all payments are made  fully  and in a 
timely manner. The Commission has put procedures in place to ensure the repayment of borrowings even 
in case of a loan default. 

Borrowings of the EU constitute direct and unconditional obligations of the EU and are guaranteed by the 
EU  Member  States  (budgetary  contingent  liabilities).  Borrowings  undertaken  to  fund  loans  to  countries 
outside  the  EU  are  covered  by  the  Guarantee  Fund  for  external  actions.  Should  a  beneficiary  Member 
State  default,  the  debt  service  will  be  drawn  from  the  available  treasury  balance  of  the  Commission,  if 
possible.  If  that  would  not  be  possible,  the  Commission  would  draw  the  necessary  funds  from  the 
Member  States.  EU  Member  States  are  legally  obliged,  according  to  the  EU  own  resources  legislation 
(Article  14  of  Council  Regulation  609/2014),  to  make  available  sufficient  funds  to  meet  the  EU’s 
obligations. Thus investors are only exposed to the credit risk of the EU, not to that of the beneficiary of 
loans  funded.  “Back-to-back”  lending  ensures  that  the  EU  budget  does  not  assume  any  interest  rate  or 
foreign exchange risk. 

For  each  country  programme,  the  EP,  the  Council  and  the  Commission  decisions  determine  the  overall 
granted amount, the number of instalments to be disbursed, and the maximum (average) maturity of the 
loan  package.  Subsequently,  the  Commission  and  the  beneficiary  country  agree  the  loan/funding 
parameters, in particular the maturity of instalments. In addition, except for the first one, all instalments 
of  the  loan  depend  on  compliance  with  policy  conditions,  in  the  context  of  a  joint  EU  /  International 
Monetary  Fund  (IMF)  financial  assistance,  which  is  another  factor  influencing  the  timing  of  funding 
operations.  This  implies  that  the  timing  and  maturities  of  issuances  are  dependent  on  the  related  EU 
lending  activity.  Funding  is  exclusively  denominated  in  euro  and  the  maturity  spectrum  is  from  3  to  30 
years. 

98 

 
 
 
 
Annual accounts of the European Union 2016 

The  following  table  provides  an  overview  of  the  planned  reimbursement  schedule  in  nominal  value  for 
outstanding EFSM and BOP loan amounts at the balance sheet date: 

BOP 

EFSM 

Hungary 

Latvia  Romania 

Total 

Ireland  Portugal 

Total 

1.15 

1.35 

1.0 

1.15 

1.35 

1.5 

0.5 

3.9 

0.6 

4.5 

3.0 

6.75 

9.75 

0.2 

0.2 

EUR billions 

TOTAL 

1.15 

5.85 

1.5 

9.75 

2.7 

3.5 

2.6 

0.2 

4.0 

3.0 

2.3 

1.4 

2.7 

3.5 

2.6 

4.0 

3.0 

2.3 

1.4 

2.25 

2.25 

3.0 

2.0 

1.0 

1.8 

3.0 

3.0 

2.0 

1.0 

1.8 

3.0 

2.7 

1.5 

1.8 

2.0 

2.0 

0.4 

2.25 

1.0 

1.8 

1.5 

2.0 

0.8 

2.0 

1.0 

2.3 

1.0 

3.0 

2.0 

1.5 

22.5 

2017 

2018 

2019 

2021 

2022 

2023 

2024 

2025 

2026 

2027 

2028 

2029 

2031 

2032 

2035 

2036 

2038 

2042 

Total 

0 

0.7 

3.5 

4.2 

24.3 

46.8 

51.0 

The  Inter-governmental  financial  stability  mechanisms  European  Financial  Stability  Facility  (EFSF)  and 
European Stability  Mechanism  (ESM) are  outside the EU  Treaty  framework and thus not included in the 
consolidated annual accounts of the EU. 

3.3.  CONTINGENT LIABILITIES RELATING TO 

BUDGETARY GUARANTEES 

The EU has given guarantees to the EIB Group on loans granted outside of the EU and on debt and equity 
operations  covered  by  the  EFSI  guarantee.  At  31 December 2016,  the  EU  shows  in  the  notes  to  its 
consolidated financial statements (see  note 4.1.1) contingent liabilities for both guarantees. In order to 
mitigate  the  risk  guarantee  calls  by  the  EIB  Group  could  have  on  the  EU  budget,  the  EU  has  created 
dedicated guarantee funds, i.e. the Guarantee Fund for external actions and the EFSI Guarantee Fund. 

The  Guarantee  Fund  for  external  actions  is  provisioned  by  the  EU  budget  so  as  to  cover  9 %  of  the 
guaranteed loans for EIB external lending mandate activities to third countries outstanding at year-end. 
At 31 December 2016 the total asset value of EUR 2.3 billion covers an exposure of amounts disbursed of 
EUR 19.8 billion, of amounts signed of EUR 28.8 billion for a ceiling of EUR 39.3 billion.  

The  EFSI  Guarantee  Fund  started  its  activities  in  2016  and  will  gradually  reach  EUR 8 billion  by  2022, 
thus  provisioning  50 %  of  the  maximum  exposure  of  the  EU  guarantee  of  EUR 16 billion.  An  amount  of 
EUR 1 billion  was  provisioned  to  the  EFSI  Guarantee  Fund  in  2016  and  EUR 4.4 billion  of  guaranteed 
amounts  have  been  disbursed  and  EUR 11.2 billion  have  in  total  been  signed  (thus  including  amounts 
disbursed). 

99 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Annual accounts of the European Union 2016 

3.4.  MANAGING THE REFUGEE CRISIS – FACILITY FOR 

REFUGEES IN TURKEY 

The  EU  faces  an  unprecedented  crisis  which  requires  solidarity,  togetherness  and  efficiency.  Challenges 
are common and responses need to be coordinated. Turkey’s geographical position makes it a prominent 
reception  and  transit  country  for  many  refugees  and  migrants.  As  a  result  of  an  unprecedented  influx 
mainly  due  to  the  Syria  conflict,  the  country  has  been  hosting  the  highest  number  of  refugees  and 
migrants in the world. 

In  2015,  the  EU  and  its  Member  States  decided  to  step  up  their  political  and  financial  engagement  to 
support  Turkey  in  its  efforts  in  hosting  refugees.  Comprehensive  cooperation  based  on  shared 
responsibility, mutual commitments and delivery between the EU and Turkey was agreed upon within the 
framework of the 29 November 2015 EU-Turkey Statement. The summit of 29 November 2015 activated 
the EU-Turkey Joint Action Plan (JAP) to help Turkey address the consequences of the Syria conflict. 

In  answer  to  the  call  from  EU  Member  States  for  significant  additional  funding  to  support  refugees  in 
Turkey,  the  Commission  established  the  Facility  for  Refugees  in  Turkey  by  means  of  the  Commission 
Decision  of  24  November  2015,  amended  on  10  February  20168.  The  Facility  is  a  mechanism  to 
coordinate  the  mobilisation  of  resources  made  available  under  both  the  EU  budget  and  additional 
contributions from Member States integrated into the EU budget as external assigned revenue amounting 
to  a  total  of  EUR 3 billion  for  the  period  2016-2017.  Member  States  committed  politically  to  providing 
national  contributions in  the  framework  of  the  Common  Understanding  between  EU  Member  States  and 
the European Commission which was adopted by the representatives of the governments of the Member 
States on 3 February 2016. The Common Understanding also establishes a conditionality framework. The 
EUR 3 billion  is  made  available  in  addition  to  EUR 345 million  already  allocated  by  the  Commission  to 
Turkey in response to the Syrian refugee crisis before the start of the Facility and is additional to Member 
States' bilateral aid.  

The  Facility  became  operational  on  17  February  2016  with  the  first  meeting  of  the  Facility  Steering 
Committee.  The  Facility  for  Refugees  in  Turkey  is  a  coordinating  mechanism  that  allows  for  the  swift, 
effective  and  efficient  mobilisation  of  EU  assistance  to  refugees  in  Turkey.  The  Facility  ensures  the 
optimal  mobilisation  of  relevant  existing  EU  financing  instruments,  either  as  humanitarian  assistance  or 
non-humanitarian assistance, to ensure that the needs of refugees and host communities are addressed 
in a comprehensive and coordinated manner.  

The  Steering  Committee  of  the  Facility  provides  strategic  guidance  on  the  overall  priorities,  the  type  of 
actions to be supported, the amounts to be allocated and the financing instruments to be mobilised, as 
well as, when appropriate, on the conditions relating to the implementation by Turkey of its commitments 
under  the  EU-Turkey  Joint  Action  Plan.  The  Steering  Committee  is  chaired  by  the  Commission  and 
composed of two representatives of the Commission and one representative of each Member State with 
Turkey sitting in an advisory capacity. 

In  line  with  Article  3(2)  of  the  Commission  Decision  establishing  the  Facility,  the  second  Steering 
Committee of 12 May 2016 agreed that the Facility should focus on six priority areas: (1) humanitarian 
assistance,  (2)  migration  management,  (3)  education,  (4)  health,  (5)  municipal  infrastructure  and  (6) 
socio-economic support. 

The  total  budget  coordinated  by  the  Facility  is  EUR 3 billion  to  be  contracted  in  the  period  2016-2017. 
This  is  made  up  of  EUR 1 billion  from  the  EU  budget,  and  EUR 2 billion  in  additional  funding  from  the 
Member States. Member States' contributions are made directly to the EU budget in the form of external 
assigned  revenue  pursuant  to  Article  21(2)(b)  FR  and  assigned  to  the  IPA  II  and  HUMA  budget  lines 
respectively.  Of  the  EUR 1 billion  from  the  EU  budget,  EUR 250 million  was  mobilised  in  2016  and 
EUR 750 million is set aside for the Facility in the 2017 budget. 

8   Commission Decision C(2016) 60/03 of 10.02.2016 on the Facility for Refugees in Turkey amending Commission 

Decision C(2015) 9500 of 24 November 2015. 

100 

 
 
 
 
                                                 
Annual accounts of the European Union 2016 

The Facility is financed from the following sources: 

EU budget 

Humanitarian aid 

Non-humanitarian aid 

Instrument for Pre-Accession Assistance 

Development Cooperation Instrument 

Instrument contributing to Stability and Peace 

Sub-total non-humanitarian aid 

2016 

2017 

Total 

EUR millions 

165 

55 
10 
20 
85 

145 

595 
10 
0 
605 

310 

650 
20 
20 
690 

Total 

250 

750 

1 000 

Contributions from Member States 

2 000 

The  Commission  concluded  individual  contribution  agreements  with  all  Member  States  concerning  their 
national  contributions  for  the  combined  total  of  EUR 2 billion  pursuant  to  Article  7  (2)  of  the  Rules  of 
Application of the FR. 

The  Facility  is  implemented  as  humanitarian  and  non-humanitarian  assistance,  with  EUR 1.4 billion  and 
EUR 1.6 billion  indicatively  allocated  to  the  respective  strands.  Humanitarian  assistance  supports  the 
most  vulnerable  refugees  (and  other  persons  of  concern)  through  predictable  and  dignified  support 
addressing  basic  needs  and  protection.  Non-humanitarian  assistance  supports  the  longer-term 
livelihoods, socio-economic and educational perspectives of refugees. It aims to help children with access 
to  primary  and  secondary  education  and  improvements  to  educational  infrastructure,  including  school 
buildings  and  learning  materials.  It  also  focuses  on  exposed  groups,  e.g.  by  protecting  women  against 
sexual and gender based violence and improving access to sexual and reproductive health care. 

The  Commission  is  to  keep  the  EP  and  the  Council  regularly  informed  about  the  implementation  of  the 
Facility for Refugees in Turkey and has issued the first annual report of the Facility on 2 March 20179. 

3.5.  YOUTH EMPLOYMENT 

Almost  4.2  million  people  under  the  age  of  25  in  the  EU  were  unemployed  as  of  August  2016,  which 
represents an  unemployment rate  of  18.6 %.  While this is an improvement  over the  peak  of  23.7 % in 
2013, it still means that almost 1 in every 5 young people is out of work. This number is even higher in 
some  Member  States,  for  instance  Greece  (42.7 %),  Spain  (43.2 %)  and  Italy  (38.8 %)  which  are 
particularly affected. 

To combat youth unemployment the EU continued in 2016 to support the roll out of the Youth Guarantee 
in  the  context  of  the  Youth  Employment  Initiative  (YEI)  in  Member  States.  The  YEI  aims  to  reduce  the 
levels  of  youth  unemployment  in  the  worst  affected  regions  of  the  EU.  Launched  in  2013,  the  YEI  is 
providing EUR 6.4 billion of targeted funding for the period 2014-2020 to support actions that help young 
people access the labour  market  in  these regions.  Of  the total  EUR 6.4 billion  budget  of  the YEI,  half  is 
provided by a specific EU budget line and the other half comes from the ESF. 

The  YEI  supports  young  people  aged  15-24  (or  15-29  in  some  EU  Member  States)  who  are  not  in 
education,  employment  or  training  (NEETs).  This  can  include  long-term  unemployed  young  people  and 
those  not  registered  as  job-seekers.  In  order  to  be  eligible  to  receive  YEI  support,  these  young  people 
must be living in regions where youth unemployment was higher than 25 % in 2012. Currently there are 
regions in 20 Member States benefiting from YEI support. 

9   See the Communication from the Commission to the EP and the Council, First Annual Report on the Facility for 

Refugess in Turkey, COM(2017) 130 final, 2.3.2017. 

101 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                 
Annual accounts of the European Union 2016 

The funding provided by the YEI is used in the implementation of the Youth Employment Package, and in 
particular national Youth Guarantee schemes in the EU Member States that benefit from the YEI. The YEI 
is able to reach out directly to young people not in education, employment or training and support them 
on a personal level. The “offers” that are funded by the YEI and provided to young people through Youth 
Guarantee  schemes  range  from  apprenticeships  and  training  courses  to  subsidies  for  employers  and 
start-up  support,  depending  on  the  specific  needs  of  each  young  person.  In  this  way  the  YEI 
complements  the  support  from  other  EU  financial  resources  such  as  the  ESF,  which  reaches  beyond 
individuals and helps to bring about educational and employment reforms. 

Youth  Guarantee  schemes  are  tailored  national  programmes  that  aim  to  ensure  all  young  people  under 
the age of 25 (or 29 in some Member States) receive a good quality, concrete offer of support within four 
months  of  leaving  education  or  becoming  unemployed.  To  achieve  this,  the  Youth  Guarantee  schemes 
include  direct  measures  targeting  young  people,  as  well  as  comprehensive,  longer-term  reforms  of 
employment  and  education  systems,  based  on  wide-ranging  partnerships  between  all  relevant 
stakeholders. 

In October 2016 a progress report showed how the 2013 Youth Guarantee, backed by the YEI, the ESF 
and national funding, has made a difference on the ground. Three years on from its launch in 2013 there 
are 1.4 million fewer young people unemployed in the EU. Around 9 million young people have taken up 
an  offer  of  a  job,  a  traineeship  or  an  apprenticeship.  It  has  led  to  bold  structural  reforms  in  many 
Member  States  and  helped  build  business–education  partnerships.  To  ensure  the  full  and  sustainable 
implementation of the Youth Guarantee the Commission proposed the continuation of the YEI until 2020 
and  the  extension  of  its  resources.  Furthermore,  the  Commission  announced  a  new  dedicated  long-
duration  (between  6  and  12  months)  mobility  scheme  for  apprentices,  Erasmus  Pro,  within  the  existing 
Erasmus+ programme, to support work-based learning abroad. 

The Commission launched a New Skills Agenda for Europe in June  2016 with 10 actions to improve the 
quality of skills and their relevance for the labour market. These include an initiative to help low-skilled 
adults improve their literacy, numeracy and digital skills and/or to help them progress towards an upper 
secondary education qualification or equivalent. 

During  the  first  three  years  of  the  2014-20  programming  period  the  YEI  faced  implementation  delays 
similar to the ones observed for the other ESI Funds under MFF heading 1b. Several reasons led to slower 
level  of  payments  than  initially  foreseen,  such  as  the  late  adoption  of  the  related  ESF  operational 
programmes and the lengthy preparation for their implementation, including the setting-up of structures 
and  procedures  required  under  the  relevant  ESF  regulatory  framework.  To  a  certain  extent,  delays 
observed  in  the  initial  stages  of  YEI  implementation  can  partly  be  attributed  also  to  the  administrative 
capacity constraints of the different responsible structures, especially given the overlap between the two 
programming  periods.  Despite  these  delays  YEI  implementation  both  on  the  ground  and  in  terms  of 
payments made by the Commission has so far been faster than the one observed for the ESF, ERDF and 
CF. 

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EUROPEAN UNION 
FINANCIAL YEAR 2016 

BUDGETARY IMPLEMENTATION REPORTS 
AND EXPLANATORY NOTES 

It should be noted that due to the rounding of figures into millions of euros, some financial data in the 
tables below may appear not to add-up.

103 

 
 
 
 
 
 
 
 
 
 
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CONTENTS 

EU BUDGET RESULT ................................................................................................. 105 
STATEMENTS OF COMPARISON OF BUDGET AND ACTUAL AMOUNTS ............................... 106 
NOTES TO THE BUDGETARY IMPLEMENTATION REPORTS ............................................... 109 
THE EU BUDGET FRAMEWORK .......................................................................... 109 
1. 

1.1.  MULTIANNUAL FINANCIAL FRAMEWORK 2014-2020 ........................................... 109 
1.2.  ANNUAL BUDGET .......................................................................................... 111 
1.3.  POLICY AREAS ............................................................................................. 111 
1.4.  REVENUE .................................................................................................... 112 
1.5.  CALCULATION OF THE BUDGET RESULT ........................................................... 113 
1.6.  RECONCILIATION OF ECONOMIC RESULT WITH BUDGET RESULT ......................... 114 
IMPLEMENTATION OF THE 2016 EU BUDGET – COMMENTARY ................................ 115 

2. 

2.1.  REVENUE .................................................................................................... 115 
2.2.  EXPENDITURE .............................................................................................. 116 
IMPLEMENTATION OF EU BUDGET REVENUE ....................................................... 118 

3. 

3.1.  SUMMARY OF THE IMPLEMENTATION OF EU BUDGET REVENUE ............................ 118 
IMPLEMENTATION OF EU BUDGET EXPENDITURE ................................................. 119 

4. 

4.1.  MFF: BREAKDOWN & CHANGES IN COMMITMENT & PAYMENT APPROPRIATIONS ..... 119 
4.2.  MFF: IMPLEMENTATION OF COMMITMENT APPROPRIATIONS ................................ 120 
4.3.  MFF: IMPLEMENTATION OF PAYMENT APPROPRIATIONS ...................................... 121 
4.4.  MFF: MOVEMENTS IN COMMITMENTS OUTSTANDING (RAL) ................................. 122 
4.5.  MFF: COMMITMENTS OUTSTANDING BY YEAR OF ORIGIN .................................... 123 
4.6.  POLICY AREA: BREAKDOWN AND CHANGES IN COMMITMENT AND PAYMENT 

APPROPRIATIONS ......................................................................................... 124 
4.7.  POLICY AREA: IMPLEMENTATION OF COMMITMENT APPROPRIATIONS ................... 125 
4.8.  POLICY AREA: IMPLEMENTATION OF PAYMENT APPROPRIATIONS ......................... 126 
4.9.  POLICY AREA: MOVEMENTS IN COMMITMENTS OUTSTANDING (RAL) .................... 127 
4.10. POLICY AREA: COMMITMENTS OUTSTANDING BY YEAR OF ORIGIN ....................... 128 
IMPLEMENTATION OF THE BUDGET BY INSTITUTION ............................................ 129 

5.1.  IMPLEMENTATION OF BUDGET REVENUE .......................................................... 129 
5.2.  IMPLEMENTATION OF COMMITMENT APPROPRIATIONS ....................................... 130 
5.3.  IMPLEMENTATION OF PAYMENT APPROPRIATIONS ............................................. 131 
IMPLEMENTATION OF THE AGENCIES' BUDGET .................................................... 132 

6.1.  BUDGET REVENUE ........................................................................................ 132 
6.2.  COMMITMENT AND PAYMENT APPROPRIATIONS BY AGENCY ................................ 134 

5. 

6. 

104 

 
 
Annual accounts of the European Union 2016 

EU BUDGET RESULT 

Revenue for the financial year 
Payments against current year appropriations 
Payment appropriations carried over to  year N+1 
Cancellation of unused appropriations carried over from 
year N-1 
Evolution of assigned revenue 
Exchange differences for the year 
Budget result* 
* Of which EFTA result is EUR 0 million in 2016 and EUR (2) million in 2015. 

2016 
144 717 
(135 180) 
(1 655) 
 63 

(1 367) 
 (173) 
6 405 

EUR millions 
2015 
146 624 
(143 485) 
(1 299) 
 29 

 (704) 
 182 
1 347 

                                                                           105 

 
 
 
 
 
 
Annual accounts of the European Union 2016 

STATEMENTS OF COMPARISON OF BUDGET AND ACTUAL 
AMOUNTS 

BUDGET REVENUE 

Initial 
adopted 
budget 

Final 
adopted 
budget 

Entitlements 
established 

EUR millions 

Revenue 

1  Own resources 
11-Sugar levies 
12-Customs duties 
13-VAT 
14-GNI 
15-Correction of budgetary 
imbalances 
16-Reduction of GNI based 
contribution of the 
Netherlands and Sweden 
3  Surpluses, balances and 

adjustments 

142 269 
 125 
18 465 
18 813 
104 866 
– 

– 

– 

4  Revenue accruing from 

1 348 

1 348 

133 677 
 133 
20 115 
16 279 
97 149 
– 

132 192 
 133 
19 987 
15 935 
95 578 
 580 

132 166 
 133 
19 961 
15 935 
95 578 
 580 

– 

 (22) 

 (22) 

persons working with the 
institutions and other union 
bodies 

5  Revenue accruing from the 
administrative operation  of 
the institutions 

6  Contributions and refunds in 

connection with Union 
agreements and programmes 
Interests on late payments 
and fines 

7 

8  Borrowing and lending 

operations 

9  Miscellaneous revenue 

Total 

1 349 

 55 

 60 

 123 

 5 

 55 

 60 

 123 

 5 

1 358 

1 459 

1 358 

1 452 

 600 

 579 

6 204 

5 928 

9 739 

 46 

3 175 

 41 

 25 
143 885 

 25 
136 642 

 27 
151 624 

 17 
144 717 

*For details of the 2016 revenue implementation see note 3 and for explanations note 2.1. 

                                                                           106 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Annual accounts of the European Union 2016 

BUDGET EXPENDITURE: COMMITMENTS BY MULTIANNUAL 
FINANCIAL FRAMEWORK (MFF) HEADING 

MFF Heading 

1.  Smart and inclusive growth 
1a: Competitiveness for 
growth and jobs 
1b: Economic, social and 
territorial cohesion 

2.  Sustainable growth: natural 

resources 
of which: Market related 
expenditure and direct 
payments 

3.  Security and citizenship 
4.  Global Europe 
5.  Administration 

of which: Administrative 
expenditure of the institutions 

6.  Compensations 
8.  Negative reserve and deficit 

carried over from the 
previous financial year  

9.  Special Instruments 

Total 

Initial 
adopted 
budget 

69 841 
19 010 

Final 
adopted 
budget 

69 841 
19 010 

50 831 

50 831 

62 484 

62 470 

Total 
appropriations 
available 

EUR millions 

Commitments 
made 

73 039 
21 569 

51 471 

66 952 

71 731 
20 332 

51 400 

64 547 

42 220 

42 218 

46 051 

44 285 

4 052 
9 167 
8 935 
3 771 

– 
– 

4 292 
9 377 
8 951 
3 778 

– 
– 

4 423 
12 240 
9 642 
4 121 

– 
– 

4 336 
11 278 
9 358 
3 979 

– 
– 

 525 
155 004 

 346 
155 277 

 395 
166 690 

 61 
161 310 

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Annual accounts of the European Union 2016 

BUDGET EXPENDITURE: PAYMENTS BY MULTIANNUAL 
FINANCIAL FRAMEWORK (MFF) HEADING 

MFF Heading 

1.  Smart and inclusive growth 
1a: Competitiveness for 
growth and jobs 
1b: Economic, social and 
territorial cohesion 

2.  Sustainable growth: natural 

resources 
of which: Market related 
expenditure and direct 
payments 

3.  Security and citizenship 
4.  Global Europe 
5.  Administration 

of which: Administrative 
expenditure of the institutions 

6.  Compensations 
8.  Negative reserve and deficit 

carried over from the 
previous financial year  

9.  Special Instruments 

Total 

Initial 
adopted 
budget 

66 263 
17 418 

Final 
adopted 
budget 

59 459 
17 406 

48 844 

42 053 

55 121 

55 214 

Total 
appropriations 
 available 

63 618 
20 976 

42 642 

59 464 

EUR millions 
Payments 
made 

56 265 
18 461 

37 804 

57 412 

42 212 

42 210 

46 057 

44 084 

3 022 
10 156 
8 935 
3 771 

– 
– 

3 069 
9 860 
8 951 
3 778 

– 
– 

3 195 
11 163 
10 490 
4 683 

– 
– 

3 077 
10 277 
9 324 
3 975 

– 
– 

 389 
143 885 

 90 
136 642 

 140 
148 069 

 61 
136 416 

For details of the 2016 expenditure implementation see note 4 and for explanations note 2.2. 

108 

 
 
 
 
 
 
 
 
 
 
 
 
Annual accounts of the European Union 2016 

NOTES TO THE BUDGETARY IMPLEMENTATION REPORTS  

1. 

THE EU BUDGET FRAMEWORK 

The  budgetary  accounts  are  kept  in  accordance  with  the  Financial  Regulation  (FR)  and  its  rules  of 
application. The general budget is the instrument which provides for and authorises the Union's revenue 
and expenditure every year, within the ceilings and other provisions laid down in the multiannual financial 
framework  in  line  with  the  legislative  acts  concerning  multiannual  programmes  adopted  under  that 
framework. 

1.1.  MULTIANNUAL FINANCIAL FRAMEWORK 2014-2020 

1. Smart and inclusive 
growth 

1.a Competitiveness for 
growth and jobs 
1.b Economic, social and 
territorial cohesion 
2. Sustainable growth: 
natural resources 

of which: market related 
expenditure and direct 
payments 

3. Security and citizenship 
4. Global Europe 
5. Administration 

of which: Administrative 
expenditure of the 
institutions 
6. Compensations 
8. Negative reserve 
9. Special Instruments 
Commitment 
appropriations 

Total payment 
appropriations 

2014 
  52 756 

2015 
  77 986 

2016 
  69 304 

2017 
  73 512 

2018 
  76 420 

2019 
  79 924 

EUR millions 
Total 
  513 563 

2020 
  83 661 

  16 560 

  17 666 

  18 467 

  19 925 

  21 239 

  23 082 

  25 191 

  142 130 

  36 196 

  60 320 

  50 837 

  53 587 

  55 181 

  56 842 

  58 470 

  371 433 

  49 857 

  64 692 

  64 262 

  60 191 

  60 267 

  60 344 

  60 421 

  420 034 

  43 779 

  44 190 

  43 951 

  44 146 

  44 163 

  44 241 

  44 264 

  308 734 

  1 737 

  8 335 

  8 721 

  7 056 

   29 

– 

  2 456 

  8 749 

  9 076 

  7 351 

  2 546 

  9 143 

  9 483 

  7 679 

  2 578 

  9 432 

  9 918 

  8 007 

  2 656 

  9 825 

  10 346 

  8 360 

  2 801 

  10 268 

  10 786 

  8 700 

  2 951 

  10 510 

  11 254 

  9 071 

  17 725 

  66 262 

  69 584 

  56 224 

– 

– 

– 

– 

– 

– 

– 

– 

– 

– 

– 

– 

   29 

– 

– 
  121 435 

– 
  162 959 

– 
  154 738 

– 
  155 631 

– 
  159 514 

– 
  164 123 

– 
  168 797 

– 
 1 087 197 

  135 762 

  140 719 

  144 685 

  142 906 

  149 713 

  154 286 

  157 358 

 1 025 429 

The  above  table  shows  the  MFF  ceilings  at  current  prices.  2016  was  the  third  financial year  covered  by 
the  MFF  2014-2020.  The  overall  ceiling 
for  2016  was 
EUR 154 738 million,  equivalent  to  1.05 %  of  the  EU  GNI,  whilst  the  corresponding  ceiling  for  payment 
appropriations  was  EUR 144 685 million,  or  0.98 %  of  the  EU  GNI  valid  throughout  the  budgetary  year 
2016. 

for  commitment  appropriations 

The adjustment of cohesion policy envelopes according to Art. 7 of the MFF Regulation was implemented 
by  the  Technical  Adjustment  of  the  MFF  for  2017  made  by  the  Commission  (COM(2016)  311  of 
30 June 2016), resulting in an upwards adjustment of the MFF ceilings for 2017-2020 for a total amount 
of  EUR 4 642 million  in  commitment  appropriations  under  Heading  1(b)  and  of  EUR 1 367 million  in 
payment appropriations (current prices). 

New  flexibility  provisions  have  been  agreed  for  the  2014-2020  MFF.  One  of  the  new  provisions  is  a 
possibility to transfer unspent margins under the payment ceilings to the following years – via the Global 
Margin  for  Payments  in  the  framework  of  the  technical  adjustment  of  the  MFF  for  the  following  year. 
Therefore,  the  unspent  amount 
in  current  prices)  and  2016 
(EUR 13 991 million in current prices) was transferred to the years 2018-2020 and the ceilings of 2015, 
2016 and 2018-2020 were adjusted accordingly – see the above mentioned technical adjustment of the 
MFF for 2017 and the technical adjustment for 2018 (COM(2017) 220 of 24 May 2017). 

from  2015  (EUR 1 288 million 

On 14 September 2016 the Commission presented its Communication on the mid-term review/revision of 
the  MFF  2014-2020  (COM(2016)  603),  which  was  accompanied  by  a  number  of  legislative  proposals, 
including a proposal to amend the MFF Regulation (COM(2016) 604) and a proposal to simplify financial 
rules under the FR and relevant basic acts (COM(2016) 605). In budgetary terms, the proposals aim at 
increasing the flexibility of the MFF by a number of amendments to the MFF Regulation and by "topping 

109 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Annual accounts of the European Union 2016 

up"  funding  for  priority  spending  on  jobs  and  growth  and  migration  and  security  by  using  available 
margins and flexibilities. An agreement on these proposals is expected in summer of 2017. 

Finally, following the entry into force of Council Decision 2014/335 on the system of own resources of the 
European Union (OJ L 168, 7.6.2014) and in accordance with its Article 3(3), the ceilings set out in that 
Decision were recalculated on the basis of ESA 2010 data which generally increased compared to the GNI 
based on ESA 95. Accordingly, the ceiling for own resources was adjusted from 1.23 % to 1.20 % of the 
EU  GNI;  the  ceiling  for  commitment  appropriations  was  adjusted  from  1.29 %  to  1.26 %  of  EU  GNI 
(COM(2016) 829 of 21 December 2016). 

An explanation of the various headings of the MFF is given below: 

Heading 1 – Smart and inclusive growth 

This heading is divided into two separate, but interlinked components 

1a  Competitiveness  for  growth  and  jobs,  encompassing  expenditure  on  research  and  innovation, 
education  and  training,  Connecting  Europe  Facility,  social  policy,  the  internal  market  and 
accompanying policies. 

1b  Economic,  social  and  territorial  cohesion,  designed  to  enhance  convergence  of  the  least 
developed  Member  States  and  regions,  to  complement  the  EU  strategy  for  sustainable 
development outside the less prosperous regions and to support inter regional cooperation. 

Heading 2 – Sustainable growth: natural resources 

Heading  2  includes  the  common  agricultural  and  fisheries  policies,  and  the  environmental  measures,  in 
particular the Life + program. 

Heading 3 – Security and citizenship 

Heading 3 (Security and citizenship) reflects the growing importance attached to certain fields where the 
EU  has  been  assigned  particular  tasks  –  justice  and  home  affairs,  border  protection,  immigration  and 
asylum  policy,  public  health  and  consumer  protection,  culture,  youth,  information  and  dialogue  with 
citizens. 

Heading 4 – Global Europe 

Heading 4 covers all external action, including development cooperation, humanitarian aid, pre-accession 
and neighbourhood instruments. The EDF remains outside of the EU budget and is not part of the MFF. 

Heading 5 - Administration 

This  heading  covers  administrative  expenditure  for  all  institutions,  pensions  and  the  European  Schools. 
For the Institutions other than the Commission, these costs make up the total of their expenditure. 

Heading 6 - Compensations 

In accordance with the political agreement that new Member States should not become net-contributors 
to the budget at the very beginning of their membership, compensation was foreseen under this heading. 
This amount was available as transfers to them to balance their budgetary receipts and contributions. 

Heading 9 – Special instruments 

Flexibility mechanisms enable the EU to mobilise the necessary funds to react to unforeseen events such 
as crisis and emergency situations. Their scope, financial allocation and operating modalities are provided 
for  in  the  MFF  regulation  and  the  Interinstitutional  Agreement.  In  the  current  context  of  reduced 
expenditure, they also ensure that budgetary resources can respond to evolving priorities, so that every 
euro is used where it is most needed. Most of the flexibility mechanisms are therefore kept outside the 
MFF and the funding can be mobilised above the expenditure ceilings. 

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Annual accounts of the European Union 2016 

1.2.  ANNUAL BUDGET 

Every  year,  the  Commission  estimates  all  the  Institutions'  revenue  and  expenditure  for  the  year  and 
draws up a draft budget which it sends to the budgetary authority. On the basis of this draft budget, the 
Council  sets  out  its  position,  which  is  then  the  subject  of  negotiations  between  the  two  arms  of  the 
budgetary authority. The President of the EP declares that the joint draft has been finally adopted, thus 
making the budget enforceable. During the year in question, amending budgets are adopted. The task of 
executing the budget is mainly the responsibility of the Commission. 

The  budget  structure  for  the  Commission  consists  of  administrative  and  operational  appropriations.  The 
other  Institutions  have  only  administrative  appropriations.  Furthermore,  the  budget  distinguishes 
between  two  types  of  appropriations:  non-differentiated  and  differentiated.  Non-differentiated 
appropriations  are  used  to  finance  operations  of  an  annual  nature  (which  comply  with  the  principle  of 
annuality). Differentiated appropriations are used in order to reconcile the principle of annuality with the 
need  to  manage  multi-annual  operations.  Differentiated  appropriations  are  split  into  commitment  and 
payment appropriations: 

- 

commitment appropriations: cover the total cost of the legal obligations entered into for the current 
financial year for operations extending over a number of years. However, budgetary commitments for 
actions extending over more than one financial year may be broken down over several years into 
annual instalments where the basic act so provides. 

- 

payment appropriations: cover expenditure arising from commitments entered into in the current 
financial year and/or earlier financial years. 

In the accounts, the types of funding are grouped into two main items: 

–  Final adopted budget appropriations 
–  Additional appropriations containing 

  Carryovers  from  previous  year  (the  financial  regulation  allows  for  a  limited  number  of  cases  to 

carry unspent amounts from the previous year into the current year); and 

  Assigned  revenue  arising  from  reimbursements,  contributions  from  third  parties/countries  to  EU 
programs  and  work  performed  for  third  parties  are  assigned  directly  to  the  corresponding 
expenditure budget lines and constitute the third pillar of funding 

All funding types together form the available appropriations. 

1.3.  POLICY AREAS 

As  part  of  its  use  of  Activity  Based  Management  (ABM)  the  Commission  implements  Activity  Based 
Budgeting  (ABB)  in  its  planning  and  management  processes.  ABB  involves  a  budget  structure  where 
budget  titles  correspond  to  policy  areas  and  budget  chapters  to  activities.  ABB  aims  to  provide  a  clear 
framework  for  translating  the  Commission's  policy  objectives  into  action,  either  through  legislative, 
financial or any other public policy means. By structuring the Commission's work in terms of activities, a 
clear  picture  is  obtained  of  the  Commission's  undertakings  and  simultaneously  a  common  framework  is 
established  for  priority  setting.  Resources  are  allocated  to  priorities  during  the  budget  procedure,  using 
the activities as the building blocks for budgeting purposes. By establishing such a link between activities 
and  the  resources  allocated  to  them,  ABB  aims  to  increase  efficiency  and  effectiveness  in  the  use  of 
resources in the Commission. 

A  policy  area  may  be  defined  as  a  homogeneous  grouping  of  activities  constituting  parts  of  the 
Commission's work, which are relevant for the decision-making process. Each policy area corresponds, in 
general,  to  a  Directorate  General,  and  encompassing  an  average  of  about  6  or  7  individual  activities. 
Policy areas are mainly operational, since their core activities aim at benefiting a third-party beneficiary 
within  their  respective  domains  of  activity.  The  operational  budget  is  completed  with  the  necessary 
administrative expenditure for each policy area. 

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1.4.  REVENUE 

1.4.1.  Own resources revenue 

The vast majority of revenue comes from own resources, which consist of the following categories:  

(1) Traditional own resources (TOR): usually account for +/- 14 % of own resource revenue. 

(2) Value added tax (VAT) based resource: usually accounts for around 12 % of own resource revenue. 

(3) Gross national income (GNI) based resource: usually accounts for +/- 74 % of own resource revenue. 

The  allocation  of  own  resources  is  made  in  accordance  with  the  rules  laid  down  in  the  Council  Decision 
No. 2014/335/EU, Euratom of 26 May 2014 on the system of the EU's own resources (ORD 2014). This 
decision  has  entered  into  force  on  1  October  2016  and  applies  retroactively  from  1  January  2014.  The 
effects for 2014 and 2015 have been taken into account in the 2016 budgetary year. 

The  total  amount  of  own  resources  allocated  to  the  Union  to  cover  annual  appropriations  for 
payments shall not exceed 1.20 % of the sum of all the Member States' GNIs. 

1.4.2. 

Traditional own resources (TOR) 

Traditional  own  resources  (TOR)  consist  of  customs  duties  (levied  on  imports  from  third  countries)  and 
sugar levies (paid by sugar producers to finance expenditure on the sugar common organisation of the market) 
levied  on  economic  operators  and  collected  by  Member  States  on  behalf  of  the  EU.  However,  Member 
States  keep  20 %  as  a  compensation  for  their  collection  costs.  All  established  traditional  own  resource 
amounts must be entered in one or other of the accounts kept by the competent authorities: 

- 

- 

In  the  ordinary  accounts  provided  for  in  Article  6(3)  of  Regulation  No  609/2014:  all  amounts 
recovered or guaranteed. 
In the separate accounts provided for also in the above Article: all amounts not yet recovered and/or 
not guaranteed; amounts guaranteed but challenged may also be entered in this account. 

Traditional  own  resources  must  be  entered  in  the  Commission's  account  with  the  Treasury  or  National 
Central  Bank  by  the  Member  State  at  the  latest  on  the  first  working  day  following  the  19th  day  of  the 
second  month  following  the  month  during  which  the  entitlement  was  established  (or  recovered  in  the 
case of the separate account). 

1.4.3.  Value added tax (VAT) 

Value added tax (VAT) is levied on Member States' VAT bases, which are harmonised for this purpose in 
accordance  with  EU  rules.  However,  the  VAT  base  is  capped  at  50 %  of  each  Member  State’s  GNI.  The 
uniform VAT rate applied is fixed at 0.30 % except for the period 2014-2020 in which the rate of call for 
Germany, the Netherlands and Sweden was fixed at 0.15 %. 

1.4.4.  Gross national income (GNI) 

The resource based on gross national income (GNI) is used to finance the part of the budget not covered 
by any other sources of revenue. The same percentage rate is levied on each Member States' GNI, which 
is established in accordance with EU rules. 

VAT and GNI-based resources are determined on the basis of forecasts of relevant bases made when the 
draft budget is being prepared. These forecasts are subsequently revised and updated during the budget 
year in question by means of an amending budget. Differences between the amounts due by the Member 
States by reference to the actual bases and the sums actually paid on the basis of the (revised) forecasts, 
either  positive  or  negative,  are  called  by  the  Commission  from  the  Member  States  for  the  first  working 
day of June of the second year following the budget year in question. Corrections may still be made to the 

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Annual accounts of the European Union 2016 

actual  VAT  and  GNI  bases  during  the  subsequent  four  years,  unless  a  reservation  is  issued.  These 
reservations  have  to  be  seen  as  potential  claims  on  the  Member  States  for  uncertain  amounts  as  their 
financial  impact  cannot  be  estimated  with  accuracy.  When  the  exact  amount  can  be  determined,  the 
corresponding VAT and GNI-based resources are called either in connection with VAT and GNI balances or 
by individual calls for funds. 

1.4.5.  UK correction 

A  budgetary  imbalance  correction  mechanism  in  favour  of  the  United  Kingdom  (reducing  their  own 
resource  payments  while  increasing  the  payments  of  other  Member  States)  was  instituted  by  the 
European Council in Fontainebleau (June 1984). Germany, Austria, Sweden and Netherlands benefit from 
a reduced financing of the UK correction (restricted to one fourth of their normal share). 

1.4.6.  Gross reduction 

The  European  Council  of  7-8  February  2013  concluded  that  Denmark,  the  Netherlands  and  Sweden 
should benefit from gross reductions in their annual contributions based on GNI for the period 2014-2020 
and that Austria is to benefit from gross reductions for the period 2014-2016 only. The annual reductions 
are as follows: Denmark EUR 130 million, the Netherlands EUR 695 million and Sweden EUR 185 million. 
Austria’s gross reduction were set at EUR 30 million in 2014, EUR 20 million in 2015 and EUR 10 million 
in 2016 (all amounts in 2011 prices). 

1.4.7.  Adjustment relating to the implementation of the ORD 2014 for years 2014 and 2015 

Article  11  of  the  ORD  2014  stipulates  that  once  the  Decision  enters  into  force,  it  shall  take  effect  on 
1 January 2014.  This  means  that  the  financing  for  the  years  2014  and  2015  had  to  be  recalculated 
according to the new rules. The adjustment (the difference between the old and the new ORD for years 
2014 and 2015) was entered in Amending Budget no 5/2016 and was implemented in a single payment 
on the first working day of January 2017. 

1.5.  CALCULATION OF THE BUDGET RESULT 

The budget result of the EU is returned to the Member States during the following year through deduction 
of their amounts due for that year. 

The amounts of own resources entered in the accounts are those credited during the course of the year 
to the accounts opened in the Commission's name by the governments of the Member States. Revenue 
comprises  also,  in  the  case  of  a  surplus,  the  budget  result  for  the  previous  financial  year.  The  other 
revenue entered in the accounts is the amount actually received during the course of the year. 

For  the  purposes  of  calculating  the  budget  result  for  the  year,  expenditure  comprises  payments  made 
against the year's appropriations plus any of the appropriations for that year that are carried over to the 
following year. Payments made against the year's appropriations means payments that are made by the 
accounting officer by  31 December of the financial year. For the EAGF,  payments are those effected  by 
the Member States between 16 October N-1 and 15 October N, provided that the accounting officer was 
notified of the commitment and authorisation by 31 January N+1. EAGF expenditure may be subject to a 
conformity decision following controls in the Member States. 

The budget result comprises two elements: the result of the EU and the result of the participation of the 
EFTA  countries  belonging  to  the  European  Economic  Area  (EEA).  In  accordance  with  Article  1(1)  of 
Regulation No 608/2014 laying down implementing measures for the system of own resources, this result 
represents the difference between: 

- 

- 

total revenue received for the financial year; and 

total payments made against current year's appropriations plus the total amount of that year's 
appropriations carried over to the following year. 

113 

 
 
 
The following are added to or deducted from the resulting figure: 

Annual accounts of the European Union 2016 

- 

- 

- 

the net balance of cancellations of payment appropriations carried over from previous years and any 
payments which, because of fluctuations in the euro rate, exceed non-differentiated appropriations 
carried over from the previous year;  

the evolution of assigned revenue; and 

the net exchange-rate gains or losses recorded during the year. 

Appropriations  carried  over  from  the  previous  financial  year in  respect  of  contributions  by  and  work  for 
third  parties,  which  by  definition  never  lapse,  are  included  as  additional  appropriations  for  the  financial 
year.  This  explains  the  difference  between  carryovers  from  the  previous  year  in  the  year  N  budget 
implementation  reports  and  those  carried  over  to  the  following  year  in  the  year  N-1  budget 
implementation  reports.  Appropriations  made  available  again  following  the  repayment  of  payments  on 
account are disregarded when calculating the budget result. 

Payment  appropriations  carried  over  include:  automatic  carryovers  and  carryovers  by  decision.  The 
cancellation  of  unused  payment  appropriations  carried  over  from  the  previous  year  shows  the 
cancellations of appropriations carried over automatically and by decision. 

1.6.  RECONCILIATION OF ECONOMIC RESULT WITH 

BUDGET RESULT 

ECONOMIC RESULT OF THE YEAR 

Revenue 
Entitlements established in current year but not yet 
collected 
Entitlements established in previous years and collected in 
current year 
Accrued revenue (net) 
Expenses 
Accrued expenses (net) 
Expenses prior year paid in current year 
Net-effect pre-financing 
Payment appropriations carried over to next year 
Payments made from carry-overs & cancellation of unused 
payment appropriations 
Movement in provisions 
Other 

Economic result Agencies and ECSC 

BUDGET RESULT OF THE YEAR 

2016 
1 733 

(1 969) 

3 363 

 611 

10 678 
(7 656) 
 (468) 
(3 102) 
1 379 

3 962 
(2 142) 

 16 

6 405 

EUR millions 
2015 
(13 033) 

 (318) 

7 943 

 (359) 

9 920 
(1 208) 
(4 831) 
(2 195) 
1 979 

4 950 
(1 671) 

 169 

1 347 

In accordance with the Financial Regulation, the economic result of the year is calculated on the basis of 
accrual accounting principles, while the budget result is based on modified cash accounting rules. As the 
economic result and the budget result both cover the same underlying transactions, it is a useful control 
to ensure that they are reconcilable.  

Reconciling items - Revenue 

The actual budgetary revenue for a financial year corresponds to the revenue collected from entitlements 
established  in  the  course  of  the  year  and  amounts  collected  from  entitlements  established  in  previous 
years. Therefore the entitlements established in the current year but not yet collected are to be deducted 
from the economic result for reconciliation purposes as they do not form part of budgetary revenue. On 

114 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Annual accounts of the European Union 2016 

the contrary the entitlements established in previous years and collected in current year must  be added 
to the economic result for reconciliation purposes.  

The net accrued revenue mainly consists of accrued revenue for agriculture, own resources and interests 
and dividends. Only the net-effect, i.e. accrued revenue for current year minus reversal accrued revenue 
from previous year, is taken into consideration.  

Reconciling items - Expenditure  

Net  accrued  expenses  mainly  consists  of  accruals  made  for  year-end  cut-off  purposes,  i.e.  eligible 
expenses  incurred  by  beneficiaries  of  EU  funds  but  not  yet  reported  to  the  Commission.  While  accrued 
expenses  are  not  considered  as  budgetary  expenditure,  payments  made  in  the  current  year  relating  to 
invoices registered in prior years are part of current year's budgetary expenditure. 

The  net  effect  of  pre-financing  is  the  combination  of  (1)  the  new  pre-financing  amounts  paid  in  the 
current  year  and  recognised  as  budgetary  expenditure  of  the  year  and  (2)  the  clearing  of  the  pre-
financing  paid  in  current  year  or  previous  years  through  the  acceptance  of  eligible  costs.  The  latter 
represent an expense in accrual terms but not in the budgetary accounts since the payment of the initial 
pre-financing had already been considered as a budgetary expenditure at the time of its payment.  

Besides the  payments made against the year's appropriations,  the appropriations for  that year that  are 
carried  forward  to  the  next  year  also need  to  be  taken  into  account  in  calculating  the  budget  result  for 
the year (in accordance with Article 1(1) of Regulation No 608/2014). The same applies for the budgetary 
payments made in the current year from carry-overs from previous years, and the cancellation of unused 
payment appropriations. 

The  movement  in  provisions  relates  to  year-end  estimates  made  in  the  financial  statements  (employee 
benefits mainly) that do not impact the budgetary accounts. Other reconciling amounts comprise different 
elements  such  as  asset  depreciation,  asset  acquisitions,  capital  lease  payments  and  financial 
participations for which the budgetary and accrual accounting treatments differ. 

2. 

IMPLEMENTATION OF THE 2016 EU BUDGET – 
COMMENTARY 

2.1.  REVENUE 

In  the  initial  adopted  EU  budget,  signed  by  the  President  of  the  European  Parliament  on 
25 November 2015, the amount of payment appropriations was EUR 143 885 million and the amount to 
be  financed  by  own  resources  totalled  EUR 142 269 million.  The  revenue  and  expenditure  estimates  in 
the initial budget are typically adjusted during the budgetary year, such modifications being presented in 
Amending Budgets. Adjustments in the GNI-based own resources ensure that budgeted revenue matches 
exactly  budgeted  expenditure.  In  accordance  with  the  principle  of  equilibrium,  budget  revenue  and 
expenditure (payment appropriations) must be in balance. 

During 2016, six amending budgets were adopted. Taking them into account, the final adopted revenue 
for  2016  amounted  to  EUR 136 642 million.  This  was 
financed  by  own  resources  totalling 
EUR 133 677 million  (thus  EUR 8 592 million  less  than  initially  forecasted)  and  the  remainder  by  other 
revenue.  This  is  explained  mainly  by  the  surplus  from  the  previous  financial  year  and  the  substantial 
reduction of payment appropriations that reduced Member States' GNI balancing contribution in 2016.  

As far as the own resources result is concerned, the collection of traditional own resources was very close 
to the forecasted amounts. This is primarily because the budget estimates were modified at the time the 
Amending Budget No. 4/2016 was established (according to the new forecasts of spring 2016). 

The final Member States' VAT and GNI payments also correspond closely to the final budgetary estimate. 
The differences between the forecasted amounts and the amounts actually paid are due to the differences 
between the euro rates used for budgetary purposes and the rates in force at the time when the Member 
States outside the EMU actually made their payments. 

115 

 
 
Annual accounts of the European Union 2016 

As far as the VAT and GNI balances are concerned there is a new procedure in place. The rules are set 
out in Article 10 b of the Making available regulation (Regulation 609/2014). The new procedure does not 
entail an Amending Budget and therefore the Commission will directly request the Member States to pay 
the net amounts. The impact for the EU budget will be close to zero.  Commission will communicate the 
annual adjustments to Member States and the amounts will be made available in June 2017. Also due to 
the change for 2016 there have been no balances. 

The  heading  "Contributions  and  refunds  in  connection  with  EU  agreements  and  programmes"  concerns 
mainly revenue from the EAGF and EAFRD (and in particular the clearance of accounts and irregularities), 
the  participation  of  third  countries  in  research  programs  and  other  contributions  and  refunds  to  EU 
programs/activities.  A  substantial  part  of  this  total  is  made  up  of  earmarked  revenue,  which  typically 
gives rise to the entering of additional appropriations on the expenditure side. 

The revenue from fines relates mainly to fines in the field of competition. 

2.2.  EXPENDITURE  

2016  was  the  third  year  of  the  current  programming  period  2014-2020.  The  2016  budget  set  the 
priorities of delivering on growth and jobs like its predecessor. However, it also stressed the importance 
of the new migration challenges regarding the crisis in Syria and North Africa.  

As  regards  commitments,  the  2016  budget  totalling  EUR 155.3 billion  was  4.3 %  lower  than  the  2015 
budget with a significant decrease in Heading 1b (down by 15.8 % mainly due to the one-off effect of the 
re-programming  from  2014  to  2015),  partially  counterbalanced  by  a  big  increase  in  Heading  3  (up  by 
70.2 %). 

In  2016,  amending  budget  4  further  increased  commitment  appropriations  for  programmes  tackling 
migration  and  security  issues  under  Heading  3  -  Security  and  Citizenship  for  the  amount  of 
EUR 250 million in commitment appropriations. From this increase, EUR 130 million were allocated to the 
AMIF  and  EUR 70 million  to  the  ISF.  Under  Heading  1a,  additional  commitment  appropriations  of 
EUR 74 million was allocated to EFSI, to cover its extension until 2020.  

Heading 4 Global Europe was reinforced in commitments through amending budgets by EUR 210 million 
mainly  for  the  European  Neighbourhood  Instrument  and  Humanitarian  Aid  programmes.  Funding  was 
partly  granted  through  the  reduction  of  the  Common  Foreign  and  Security  Policy  and  Macro-financial 
Assistance programmes. 

Payment  appropriations  of  the  final  adopted  budget  amounted  to  EUR 136.6 billion,  3.3 %  below  the 
2015 level. This has been mainly the result of a decrease by EUR 7.3 billion through amending budget 4, 
mostly related to Heading 1b - Economic, social and territorial cohesion and to a lesser extent to Heading 
2  -  Sustainable  Growth.  Further  details  on  the  underlying  reasons  for  this decrease  are  provided  in  the 
section below. 

2016 Implementation of available appropriations 

The  year  2016  was  closed  with  a  97 %  implementation  of  commitments  and  a  leftover  in  payment 
appropriations  of  EUR 4.8 billion.  Implementation  of  commitments  amounted  to  EUR 157.3 billion.  For 
payments, the implementation reached EUR 132.4 billion or 92 % of available appropriations. 

Following several years of constrained payment appropriations and accumulation of unpaid claims (mostly 
in cohesion), the abnormal backlog was fully phased out in 2016, in line with the 'payment plan' agreed 
with  the  EP  and  the  Council  in  2015.  The  Commission  identified  the  risk  of  under-implementation  of 
payment  appropriations  for  cohesion  already  in  March  2016  and  increased  its  surplus  estimates 
considerably  in  September,  following  Member  States'  updated  forecasts  from  July.  In  addition,  the 
Commission took into account the delays in designating national authorities, the implementation pace on 
the  ground  and  the  average  forecast  implementation  rate  for  previous  programming  periods.  It  then 
proposed  amending  budget  4/2016  to  decrease  the  level  of  payment  appropriations  by  EUR 7.3 billion, 
mostly  in  budget  lines  under  sub-heading  1b  Economic,  social  and  territorial  cohesion.  The  level  of 
payable claims actually submitted by the end of the year by Member States for 2014-2020 programmes 
proved to be an unprecedented EUR 8 billion lower than the forecast, with 26 Member States submitting 
claims below their forecast. 

116 

 
Annual accounts of the European Union 2016 

Outstanding Commitments 

The  outstanding  commitments  (RAL)  by  the  end  of  the  year  increased  significantly  to  reach 
EUR 238.8 billion. The increase of over EUR 21 billion compared to 2015 was twice as high from what was 
initially expected due to the widened gap between implemented commitments and payments (stemming 
from  amending  budget  4/2016  as  well  as  the  end-of-year  under-implementation).  In  2017  a  further 
increase  of  RAL  is  expected  given  the  difference  between  budgeted  commitment  and  payment 
appropriations (ratio 85 %). 

The outstanding legal commitments of the previous programming periods, i.e. before 2014, decreased in 
2016  from  EUR 75 billion  to  EUR 40 billion  (-47 %).  Consequently,  a  bigger  share  of  payment 
appropriations will be available for the current programmes starting from 2017.  

A  more  detailed  analysis  of  budgetary  adjustments,  their  relevant  context,  justification  and  impact  is 
presented in the Commission's report on Budgetary and Financial Management 2016, Part A "Overview at 
budget level" and Part B dealing with each heading of the multiannual financial framework (MFF). 

Budget surplus  

The budget surplus amounts to EUR 6.4 billion and arises primarily from the expenditure side, due to the 
under-implementation mainly in heading 1b (EUR 4.9 billion). The origin of surplus on the revenue side is 
mainly  due  to  important  revenues  on  fines  and  slightly  lower  own  resources  (+EUR 1.7 billion).  An 
exchange rate loss of EUR 173 million lowers the final result. 

117 

 
 
3. 

IMPLEMENTATION OF EU BUDGET REVENUE  

 Annual accounts of the European Union 2016 

3.1.  SUMMARY OF THE IMPLEMENTATION OF EU BUDGET REVENUE  

Title 

1  Own resources 
3  Surpluses, balances and adjustments 
4  Revenue accruing from persons 

working with the institutions and other 
Union bodies 

5  Revenue accruing from the 

administrative operation  of the 
institutions 

6  Contributions and refunds in 

connection with Union agreements and 
programmes 
Interests on late payments and fines 

7 
8  Borrowing and lending operations 
9  Miscellaneous revenue 
Total 

 55 

 60 

 28 
– 
 14 

 17 

 26 
– 
 7 

 21 

Income appropriations 
Final 
Initial 
adopted 
adopted 
budget 
budget 
133 677 
142 269 
1 349 
– 
1 348 
1 348 

132 164 
1 358 
1 445 

Entitlements established 

Current year 

Carried over 

Total 

On 
entitlements 
of current year 
132 163 
1 358 
1 438 

Revenue 

On 
entitlements 
carried over 
 3 
– 
 14 

132 192 
1 358 
1 459 

Total 

132 166 
1 358 
1 452 

99% 
101% 
108% 

Receipts as 
% of budget 

EUR millions 
Outstanding 

 55 

 584 

 600 

 568 

 11 

 579 

1044% 

 60 

5 929 

 274 

6 204 

5 804 

 125 

5 928 

9880% 

 275 

 123 
 5 
 25 
143 885 

 123 
 5 
 25 
136 642 

2 946 
 40 
 17 
144 483 

6 793 
 6 
 10 
7 141 

9 739 
 46 
 27 
151 624 

1 045 
 36 
 16 
142 427 

2 131 
 6 
 2 
2 290 

3 175 
 41 
 17 
144 717 

2582% 
792% 
69% 
106% 

6 564 
 5 
 10 
6 907 

118 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
4. 

IMPLEMENTATION OF EU BUDGET EXPENDITURE  

 Annual accounts of the European Union 2016 

4.1.  MFF: BREAKDOWN & CHANGES IN COMMITMENT & PAYMENT APPROPRIATIONS 

Commitment appropriations 

Payment appropriations 

EUR millions 

Budget appropriations 
Amending 
budgets & 
transfers 
2 

Additional appropriations 

Carry-overs 

Assigned 
revenue 

MFF Heading 

Smart and inclusive growth 
1a: Competitiveness for growth and jobs 
1b: Economic, social and territorial cohesion 
Sustainable growth: natural resources 
of which: Market related expenditure and 
direct payments 
Security and citizenship 
Global Europe 
Administration 
of which: Administrative expenditure of the 
institutions 
Compensations 
Negative reserve and deficit carried over 
from the previous financial year  
Special Instruments 

1 

2 

3 
4 
5 

6 
8 

9 
Total 

Initial 
adopted 
budget 
1 
69 841 
19 010 
50 831 
62 484 
42 220 

4 052 
9 167 
8 935 
3 771 

– 
– 

Final 
adopted 
budget 
3=1+2 

69 841 
19 010 
50 831 
62 470 
42 218 

4 292 
9 377 
8 951 
3 778 

– 
– 

– 
 (0) 
– 
 (15) 
 (2) 

 240 
 210 
 16 
 7 

– 
– 

4 

 153 
 0 
 153 
 410 
 410 

– 
 237 
 4 
 3 

– 
– 

– 
 804 

Total 
Appropria- 
tions 
available 
6=3+4+5 
73 039 
21 569 
51 471 
66 952 
46 051 

4 423 
12 240 
9 642 
4 121 

– 
– 

5 
3 045 
2 558 
 487 
4 072 
3 424 

 131 
2 626 
 687 
 340 

– 
– 

Initial 
adopted 
budget 
7 
66 263 
17 418 
48 844 
55 121 
42 212 

3 022 
10 156 
8 935 
3 771 

– 
– 

Budget appropriations 
Amending 
budgets & 
transfers 
8 

Final 
adopted 
budget 
9=7+8 

59 459 
17 406 
42 053 
55 214 
42 210 

3 069 
9 860 
8 951 
3 778 

– 
– 

Additional appropriations 

Total 

Carry-overs 

Assigned 
revenue 

appropria- 
tions available 

10 

 117 
 103 
 15 
 430 
 424 

 9 
 33 
 756 
 472 

– 
– 

11 
4 042 
3 467 
 575 
3 821 
3 424 

 117 
1 270 
 783 
 433 

– 
– 

12=9+10+11 
63 618 
20 976 
42 642 
59 464 
46 057 

3 195 
11 163 
10 490 
4 683 

– 
– 

(6 804) 
 (13) 
(6 791) 
 93 
 (3) 

 46 
 (295) 
 16 
 7 

– 
– 

 525 
155 004 

 (179) 
 273 

 346 
155 277 

 50 
10 610 

 395 
166 690 

 389 
143 885 

 (299) 
(7 243) 

 90 
136 642 

 1 
1 345 

 50 
10 081 

 140 
148 069 

                                       119 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
4.2.  MFF: IMPLEMENTATION OF COMMITMENT APPROPRIATIONS 

 Annual accounts of the European Union 2016 

EUR millions 

MFF Heading 

Smart and inclusive growth 
1a: Competitiveness for growth and jobs 
1b: Economic, social and territorial cohesion 
Sustainable growth: natural resources 
of which: Market related expenditure and direct payments 
Security and citizenship 
Global Europe 
Administration 
of which: Administrative expenditure of the institutions 
Compensations 
Negative reserve and deficit carried over from the previous 
financial year  
Special Instruments 

1 

2 

3 
4 
5 

6 

8 

9 
Total 

Total 
approp. 
available 
1 

from final 
adopted 
budget 
2 

73 039 
21 569 
51 471 
66 952 
46 051 
4 423 
12 240 
9 642 
4 121 
– 
– 

69 808 
18 997 
50 811 
62 013 
41 770 
4 287 
9 364 
8 887 
3 721 
– 
– 

 395 
166 690 

 61 
154 421 

Commitments made 
from 
assigned 
revenue 
4 

from 
carry-  
overs 
3 

5=2+3+4 

Total 

% 

 145 
 0 
 145 
 396 
 395 
– 
 237 
 4 
 3 
– 
– 

– 
 781 

1 778 
1 335 
 443 
2 138 
2 120 
 49 
1 677 
 467 
 254 
– 
– 

71 731 
20 332 
51 400 
64 547 
44 285 
4 336 
11 278 
9 358 
3 979 
– 
– 

– 
6 108 

 61 
161 310 

Appropriations carried over to 2017 
carry-  
assigned 
overs by 
revenue 
decision 
8 

9=7+8 

Total 

7 

Appropriations lapsing 

from final 
adopted 
budget 
10 

from 
carry- 
overs 
11 

from 
assigned 
revenue 
12 

1 267 
1 224 
 43 
1 934 
1 304 
 82 
 948 
 221 
 86 
– 
– 

 50 
4 502 

 0 
 0 
– 
 433 
 433 
– 
 10 
 1 
– 
– 
– 

 130 
 575 

1 267 
1 224 
 43 
2 368 
1 737 
 82 
 959 
 222 
 86 
– 
– 

 180 
5 077 

 33 
 13 
 20 
 23 
 15 
 5 
 3 
 62 
 57 
– 
– 

 155 
 281 

 8 
– 
 8 
 14 
 14 
– 
– 
 0 
 0 
– 
– 

– 
 22 

– 
– 
– 
– 
– 
– 
– 
– 
0 
– 
– 

– 
– 

Total 

13=10+ 
11+12 
 41 
 13 
 28 
 38 
 29 
 5 
 3 
 62 
 57 
– 
– 

 155 
 303 

6=5/1 

98% 
94% 
100% 
96% 
96% 
98% 
92% 
97% 
97% 
0% 
0% 

15% 
97% 

                                       120 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
4.3.  MFF: IMPLEMENTATION OF PAYMENT APPROPRIATIONS 

 Annual accounts of the European Union 2016 

MFF Heading 

Total 
approp. 
available 

from final 
adopted 
budget 

from 
carry-   
overs 

from 
assigned 
revenue 

Total 

% 

automatic 
carry-   
overs 

carry-  
overs by 
decision 

assigned 
revenue 

Total 

from final 
adopted 
budget 

from 
carry-  
overs 

from 
assigned 
revenue 

Total 

Payments made 

Appropriations carried over to 2017 

Appropriations lapsing 

EUR millions 

Smart and inclusive growth 
1a: Competitiveness for growth and jobs 
1b: Economic, social and territorial cohesion 
Sustainable growth: natural resources 
of which: Market related expenditure and direct 
payments 
Security and citizenship 
Global Europe 
Administration 
of which: Administrative expenditure of the 
institutions 
Compensations 
Negative reserve and deficit carried over from 
the previous financial year  
Special Instruments 

1 

2 

3 
4 
5 

6 

8 

9 
Total 

12 

13 

14=11+12+13 

 3 
 3 
– 
– 
– 

– 
– 
– 
– 

– 
– 

– 
 3 

4 341 
 46 
4 295 
 87 
 37 

 25 
 324 
 133 
 106 

– 
– 

 25 
4 936 

1 

2 

3 

4 

5=2+3+4 

6=5/1 

7 

63 618 
20 976 
42 642 
59 464 
46 057 

3 195 
11 163 
10 490 
4 683 

– 
– 

55 005 
17 257 
37 748 
54 508 
41 558 

3 035 
9 421 
8 163 
3 247 

– 
– 

 102 
 90 
 12 
 414 
 408 

 7 
 28 
 684 
 423 

– 
– 

1 158 
1 114 
 44 
2 490 
2 118 

 35 
 828 
 477 
 305 

– 
– 

56 265 
18 461 
37 804 
57 412 
44 084 

3 077 
10 277 
9 324 
3 975 

– 
– 

88 % 
88 % 
89 % 
97 % 
96 % 

96 % 
92 % 
89 % 
85 % 

0 % 
0 % 

 126 
 113 
 13 
 202 
 197 

 11 
 35 
 725 
 474 

– 
0 

8 

 5 
 5 
– 
 433 
 433 

– 
 86 
 1 
– 

– 
– 

9 

2 881 
2 350 
 531 
1 330 
1 305 

 82 
 441 
 306 
 128 

– 
– 

10=7+8+
9 
3 012 
2 468 
 544 
1 965 
1 935 

 93 
 562 
1 032 
 602 

– 
– 

11 

4 323 
 31 
4 292 
 71 
 22 

 23 
 319 
 62 
 57 

– 
– 

 15 
 12 
 3 
 16 
 16 

 2 
 5 
 72 
 49 

– 
– 

 140 
148 069 

 33 
130 164 

 0 
1 236 

 28 
5 016 

 61 
136 416 

44 % 
92 % 

 0 
1 099 

 31 
 557 

 22 
5 062 

 54 
6 717 

 25 
4 823 

 0 
 109 

                                       121 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 Annual accounts of the European Union 2016 

4.4.  MFF: MOVEMENTS IN COMMITMENTS OUTSTANDING (RAL) 

MFF Heading 

Commitments outstanding at the end of previous year 

Commitments of the year 

Commitments 
carried forward 
from previous 
year 

Decommitments/Re
valuations/ 
Cancellations 

Payments 

Commitments 
outstanding at 
year-end 

Commitments 
made during the 
year 

Payments 

Cancellation of 
commitments 
which cannot be 
carried over 

Commitments 
outstanding at 
year-end 

Smart and inclusive growth 
1a: Competitiveness for growth and jobs 
1b: Economic, social and territorial cohesion 
Sustainable growth: natural resources 
of which: Market related expenditure and direct 
payments 
Security and citizenship 
Global Europe 
Administration 
of which: Administrative expenditure of the 
institutions 
Compensations 
Negative reserve and deficit carried over from the 
previous financial year  
Special Instruments 

1 

2 

3 
4 
5 

6 
8 

9 
Total 

160 827 
34 455 
126 372 
28 191 
 49 

3 137 
24 673 
 865 
 570 

– 
– 

(1 353) 
 (701) 
 (652) 
(1 378) 
 (3) 

 (228) 
 (699) 
 (166) 
 (143) 

– 
– 

(48 608) 
(11 730) 
(36 877) 
(12 605) 
 (24) 

(1 396) 
(7 182) 
 (690) 
 (420) 

– 
– 

110 866 
22 024 
88 843 
14 207 
 22 

1 512 
16 792 
 8 
 7 

– 
– 

71 731 
20 332 
51 400 
64 547 
44 285 

4 336 
11 278 
9 358 
3 979 

– 
– 

(7 657) 
(6 731) 
 (927) 
(44 806) 
(44 060) 

(1 681) 
(3 095) 
(8 634) 
(3 555) 

– 
– 

 1 
217 693 

 (0) 
(3 825) 

 (0) 
(70 482) 

– 
143 386 

 61 
161 310 

 (61) 
(65 935) 

 (2) 
 (2) 
 (0) 
 (0) 
– 

– 
 (1) 
 (0) 
0 

– 
– 

– 
 (3) 

64 072 
13 599 
50 473 
19 740 
 225 

2 655 
8 182 
 724 
 424 

– 
– 

 0 
95 373 

EUR millions 
Total 
Commitments 
outstanding at the 
end of the year 

174 938 
35 622 
139 316 
33 947 
 247 

4 167 
24 974 
 732 
 431 

– 
– 

 0 
238 759 

                                       122 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
4.5.  MFF: COMMITMENTS OUTSTANDING BY YEAR OF ORIGIN 

 Annual accounts of the European Union 2016 

MFF Heading 

Smart and inclusive growth 
1a: Competitiveness for growth and jobs 
1b: Economic, social and territorial cohesion 
Sustainable growth: natural resources 
of which: Market related expenditure and direct 
payments 
Security and citizenship 
Global Europe 
Administration 
of which: Administrative expenditure of the 
institutions 
Special Instruments 

1 

2 

3 
4 
5 

9 
Total 

< 2010 
1 741 
 563 
1 178 
 200 
– 

 45 
 899 
– 
0 

– 
2 884 

2010 
 738 
 733 
 5 
 58 
– 

 40 
 539 
– 
0 

– 
1 376 

2011 
1 120 
 856 
 264 
 81 
– 

 67 
 843 
– 
0 

– 
2 111 

2012 
3 461 
2 223 
1 237 
 128 
 0 

 149 
1 750 
– 
0 

– 
5 488 

2013 
23 109 
4 481 
18 627 
1 234 
– 

 287 
3 291 
 0 
0 

– 
27 920 

2014 
16 371 
5 972 
10 399 
1 220 
 2 

 154 
3 784 
 0 
0 

– 
21 530 

2015 
64 326 
7 194 
57 132 
11 285 
 19 

 772 
5 686 
 1 
0 

 0 
82 069 

2016 
64 072 
13 599 
50 473 
19 740 
 225 

2 655 
8 182 
 731 
 431 

 0 
95 380 

EUR millions 

Total 
174 938 
35 622 
139 316 
33 947 
 247 

4 167 
24 974 
 732 
 431 

 0 
238 759 

                                       123 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 Annual accounts of the European Union 2016 

4.6.  POLICY AREA: BREAKDOWN AND CHANGES IN COMMITMENT AND PAYMENT 
APPROPRIATIONS 

Policy area 

01 
02 

Economic and financial affairs 
Internal market, industry, entrepreneurship 
and SMEs 
Competition 
Employment, social affairs and inclusion 
Agriculture and rural development 

03 
04 
05 
06  Mobility and transport 
07 
08 
09 

Environment 
Research and innovation 
Communications networks, content and 
technology 
Direct research 

10 
11  Maritime affairs and fisheries 
12 

Financial stability, financial services and 
capital markets union 
Regional and urban policy 
Taxation and customs union 
Education and culture 
Communication 
Health and food safety 

13 
14 
15 
16 
17 
18  Migration and home affairs 
Foreign policy instruments 
19 
Trade 
20 
International cooperation and development 
21 
Neighbourhood and enlargement 
22 
negotiations 
Humanitarian aid and civil protection 
Fight against fraud 
Commission's policy coordination and legal 
advice 
Commission's administration 
Budget 
Audit 
Statistics 
Pensions and related expenditure 
Language services 
Energy 
Justice and consumers 
Climate action 
Reserves 
Other Institutions 

26 
27 
28 
29 
30 
31 
32 
33 
34 
40 
90 
Total 

23 
24 
25 

Commitment appropriations 

Payment appropriations 

EUR millions 

Budget appropriations 

Additional appropriations 

Initial 
adopted 
budget 
1 
2 533 
2 286 

 103 
12 924 
61 382 
4 219 
 448 
5 855 
1 803 

 397 
1 083 
 85 

35 989 
 166 
2 889 
 204 
 571 
3 225 
 783 
 107 
3 162 
3 835 

1 202 
 80 
 206 

1 017 
 72 
 19 
 139 
1 647 
 399 
1 532 
 259 
 138 
 475 
3 771 
155 004 

Amending 
budgets & 
transfers 
2 

Final 
adopted 
budget 
3=1+2 

 (7) 
 3 

 (1) 
 27 
 (4) 
 2 
 0 
 (7) 
 53 

– 
 (9) 
 0 

 40 
 0 
 0 
 0 
 (14) 
 250 
 (119) 
 1 
 1 
 146 

 258 
 (1) 
 4 

 (21) 
 (13) 
 (0) 
 0 
 37 
 (3) 
 (122) 
 (0) 
 0 
 (238) 
 7 
 273 

2 525 
2 289 

 102 
12 952 
61 379 
4 221 
 448 
5 848 
1 856 

 397 
1 074 
 85 

36 029 
 167 
2 890 
 204 
 557 
3 475 
 663 
 108 
3 163 
3 981 

1 460 
 79 
 210 

 996 
 59 
 19 
 140 
1 684 
 396 
1 410 
 259 
 138 
 236 
3 778 
155 277 

Carried over 

Assigned 
revenue 

4 

– 
– 

– 
– 
 410 
– 
– 
– 
– 

– 
 0 
– 

 146 
 0 
– 
– 
– 
– 
 17 
– 
– 
 7 

 219 
– 
 0 

– 
– 
– 
– 
– 
– 
– 
– 
– 
– 
 3 
 804 

5 

 122 
 229 

 5 
 504 
4 070 
 125 
 18 
 897 
 173 

 538 
 6 
 4 

 60 
 9 
 466 
 12 
 42 
 88 
 53 
 3 
 220 
 990 

1 253 
 0 
 12 

 178 
 8 
 1 
 16 
 0 
 62 
 96 
 10 
 1 
– 
 340 
10 610 

Total 
approp. 

available 

6=3+4+5 
2 648 
2 518 

 107 
13 456 
65 858 
4 346 
 467 
6 745 
2 029 

 935 
1 081 
 89 

36 235 
 176 
3 356 
 216 
 598 
3 563 
 733 
 111 
3 383 
4 978 

2 933 
 79 
 222 

1 174 
 67 
 20 
 155 
1 685 
 458 
1 506 
 268 
 139 
 236 
4 121 
166 690 

Budget appropriations 

Additional appropriations 

Total approp. 

Initial 
adopted 
budget 
7 
1 097 
1 894 

 103 
13 031 
54 625 
2 296 
 397 
5 403 
2 373 

 403 
 758 
 86 

36 386 
 159 
3 031 
 197 
 571 
2 323 
 677 
 106 
3 346 
3 566 

1 560 
 86 
 206 

1 016 
 72 
 19 
 128 
1 647 
 399 
1 524 
 239 
 82 
 309 
3 771 
143 885 

Amending 
budgets & 
transfers 
8 

Final 
adopted 
budget 
9=7+8 

 432 
 (36) 

 (1) 
(1 818) 
 166 
 (103) 
 (5) 
 (10) 
 (32) 

 (17) 
 (145) 
 (3) 

(5 365) 
 0 
 25 
 (2) 
 (37) 
 61 
 (50) 
 1 
 21 
 (264) 

 178 
 (1) 
 4 

 (15) 
 (13) 
 (0) 
 0 
 37 
 (3) 
 46 
 (8) 
 (5) 
 (288) 
 7 
(7 243) 

1 529 
1 859 

 102 
11 213 
54 791 
2 193 
 392 
5 393 
2 341 

 385 
 613 
 83 

31 021 
 159 
3 055 
 195 
 535 
2 384 
 628 
 106 
3 367 
3 301 

1 739 
 85 
 210 

1 001 
 59 
 19 
 128 
1 684 
 396 
1 570 
 232 
 77 
 21 
3 778 
136 642 

Carried over 

Assigned 
revenue 

available 

10 

 6 
 13 

 9 
 14 
 431 
 5 
 4 
 28 
 11 

 40 
 3 
 4 

 11 
 5 
 13 
 12 
 9 
 6 
 3 
 2 
 18 
 12 

 6 
 7 
 15 

 142 
 7 
 1 
 5 
– 
 17 
 5 
 4 
 4 
– 
 472 
1 345 

11 

 125 
 372 

12=9+10+11 
1 660 
2 243 

 5 
 576 
3 818 
 123 
 16 
1 391 
 274 

 479 
 6 
 4 

 76 
 7 
 631 
 12 
 42 
 96 
 52 
 3 
 203 
 369 

 532 
 0 
 12 

 180 
 8 
 1 
 21 
 0 
 62 
 141 
 9 
 1 
– 
 433 
10 081 

 116 
11 802 
59 039 
2 321 
 412 
6 811 
2 627 

 905 
 622 
 91 

31 108 
 171 
3 699 
 219 
 586 
2 487 
 683 
 112 
3 587 
3 683 

2 277 
 92 
 237 

1 323 
 75 
 20 
 154 
1 685 
 475 
1 716 
 245 
 82 
 21 
4 683 
148 069 

                                       124 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 Annual accounts of the European Union 2016 

4.7.  POLICY AREA: IMPLEMENTATION OF COMMITMENT APPROPRIATIONS 

EUR millions 

Policy area 

Total 
approp. 
available 
1 

from final 
adopted 
budget 
2 

Commitments made 
from 
assigned 
revenue 
4 

from 
carry-   
overs 
3 

5=2+3+4 

Total 

% 

Appropriations carried over to 2017 
carry-
assigned 
overs by 
revenue 
decision 
8 

9=7+8 

Total 

7 

Appropriations lapsing 

from final 
adopted 
budget 
10 

from 
carry-
overs 
11 

from 
assigned 
revenue 
12 

 113 
 109 
 2 
 76 
1 927 
 63 
 8 
 359 
 92 
 424 
 5 
 2 

 34 
 4 
 107 
 5 
 25 
 56 
 35 
 1 
 32 
 65 
 701 
 0 
 5 
 69 
 3 
 1 
 10 
 0 
 20 
 55 
 7 
 0 
– 
 86 
4 502 

– 
 0 
– 
 0 
 433 
 0 
 0 
– 
 0 
– 
 0 
 0 

 31 
– 
 0 
– 
– 
 0 
 9 
 0 
 1 
– 
– 
– 
 0 
– 
– 
– 
– 
– 
– 
 0 
– 
 0 
 99 
– 
 575 

 113 
 109 
 2 
 76 
2 360 
 63 
 8 
 359 
 92 
 424 
 5 
 2 

 65 
 4 
 107 
 5 
 25 
 57 
 44 
 1 
 33 
 65 
 701 
 0 
 5 
 69 
 3 
 1 
 10 
 0 
 20 
 55 
 7 
 0 
 99 
 86 
5 077 

 1 
 0 
 0 
 13 
 18 
 2 
 0 
 0 
 0 
 0 
 5 
 0 

 29 
 0 
 0 
 0 
 0 
 1 
 0 
 0 
 1 
 2 
 1 
 0 
 1 
 0 
 0 
 0 
 0 
 0 
 0 
 5 
 2 
 0 
 138 
 57 
 281 

– 
– 
– 
– 
 14 
– 
– 
– 
– 
– 
– 
– 

 1 
– 
– 
– 
– 
– 
– 
– 
– 
 7 
– 
– 
– 
– 
– 
– 
– 
– 
– 
– 
– 
– 
– 
 0 
 22 

– 
– 
– 
– 
– 
– 
– 
– 
– 
– 
– 
– 

– 
– 
– 
– 
– 
– 
– 
– 
– 
– 
– 
– 
– 
– 
– 
– 
– 
– 
– 
– 
– 
– 
– 
0 
– 

Total 

13=10+ 
11+12 
 1 
 0 
 0 
 13 
 32 
 2 
 0 
 0 
 0 
 0 
 5 
 0 

 30 
 0 
 0 
 0 
 0 
 1 
 0 
 0 
 1 
 9 
 1 
 0 
 1 
 0 
 0 
 0 
 0 
 0 
 0 
 5 
 2 
 0 
 138 
 57 
 303 

6=5/1 

96% 
96% 
98% 
99% 
96% 
99% 
98% 
95% 
95% 
55% 
99% 
97% 

100% 
97% 
97% 
97% 
96% 
98% 
94% 
99% 
99% 
99% 
76% 
100% 
97% 
94% 
95% 
97% 
94% 
100% 
95% 
96% 
97% 
100% 
0% 
97% 
97% 

Economic and financial affairs 
Internal market, industry, entrepreneurship and SMEs 
Competition 
Employment, social affairs and inclusion 
Agriculture and rural development 

01 
02 
03 
04 
05 
06  Mobility and transport 
07 
08 
09 
10 
11  Maritime affairs and fisheries 

Environment 
Research and innovation 
Communications networks, content and technology 
Direct research 

12 

Financial stability, financial services and capital markets 
union 
Regional and urban policy 
Taxation and customs union 
Education and culture 
Communication 
Health and food safety 

13 
14 
15 
16 
17 
18  Migration and home affairs 
Foreign policy instruments 
19 
Trade 
20 
International cooperation and development 
21 
Neighbourhood and enlargement negotiations 
22 
Humanitarian aid and civil protection 
23 
Fight against fraud 
24 
Commission's policy coordination and legal advice 
25 
Commission's administration 
26 
Budget 
27 
Audit 
28 
Statistics 
29 
Pensions and related expenditure 
30 
Language services 
31 
Energy 
32 
Justice and consumers 
33 
Climate action 
34 
Reserves 
40 
90 
Other Institutions 
Total 

2 648 
2 518 
 107 
13 456 
65 858 
4 346 
 467 
6 745 
2 029 
 935 
1 081 
 89 

36 235 
 176 
3 356 
 216 
 598 
3 563 
 733 
 111 
3 383 
4 978 
2 933 
 79 
 222 
1 174 
 67 
 20 
 155 
1 685 
 458 
1 506 
 268 
 139 
 236 
4 121 
166 690 

2 525 
2 288 
 102 
12 938 
60 927 
4 218 
 448 
5 848 
1 856 
 397 
1 069 
 85 

35 968 
 166 
2 890 
 204 
 557 
3 473 
 654 
 108 
3 161 
3 979 
1 459 
 79 
 209 
 995 
 59 
 18 
 139 
1 684 
 396 
1 405 
 256 
 137 
– 
3 721 
154 421 

– 
– 
– 
– 
 395 
– 
– 
– 
– 
– 
 0 
– 

 145 
 0 
– 
– 
– 
– 
 17 
– 
– 
– 
 219 
– 
 0 
– 
– 
– 
– 
– 
– 
– 
– 
– 
– 
 3 
 781 

 9 
 121 
 3 
 428 
2 143 
 62 
 10 
 538 
 81 
 114 
 2 
 2 

 26 
 4 
 359 
 7 
 17 
 32 
 18 
 2 
 187 
 925 
 552 
– 
 7 
 108 
 5 
 1 
 6 
 0 
 42 
 41 
 3 
 1 
– 
 254 
6 108 

2 534 
2 409 
 105 
13 367 
63 466 
4 281 
 458 
6 386 
1 936 
 510 
1 071 
 87 

36 139 
 171 
3 249 
 211 
 573 
3 505 
 689 
 109 
3 349 
4 904 
2 231 
 79 
 216 
1 104 
 64 
 19 
 145 
1 684 
 437 
1 446 
 259 
 138 
– 
3 979 
161 310 

                                       125 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
4.8.  POLICY AREA: IMPLEMENTATION OF PAYMENT APPROPRIATIONS 

 Annual accounts of the European Union 2016 

Policy area 

Total 
approp. 
available 

from final 
adopted 
budget 

01 

02 

Economic and financial affairs 
Internal market, industry, entrepreneurship 
and SMEs 
Competition 
Employment, social affairs and inclusion 
Agriculture and rural development 

03 
04 
05 
06  Mobility and transport 
07 
08 

09 

Environment 
Research and innovation 
Communications networks, content and 
technology 
Direct research 

10 
11  Maritime affairs and fisheries 

12 

Financial stability, financial services and capital 
markets union 
Regional and urban policy 
Taxation and customs union 
Education and culture 
Communication 
Health and food safety 

13 
14 
15 
16 
17 
18  Migration and home affairs 
Foreign policy instruments 
19 
Trade 
20 
International cooperation and development 
21 
Neighbourhood and enlargement negotiations 
22 
Humanitarian aid and civil protection 
23 
Fight against fraud 
24 
Commission's policy coordination and legal 
advice 
Commission's administration 
Budget 
Audit 
Statistics 
Pensions and related expenditure 
Language services 
Energy 
Justice and consumers 
Climate action 
Reserves 
Other Institutions 

26 
27 
28 
29 
30 
31 
32 
33 
34 
40 
90 
Total 

25 

1 

1 660 
2 243 

 116 
11 802 
59 039 
2 321 
 412 
6 811 
2 627 

 905 
 622 
 91 

31 108 
 171 
3 699 
 219 
 586 
2 487 
 683 
 112 
3 587 
3 683 
2 277 
 92 
 237 

2 

1 512 
1 843 

 94 
8 819 
54 127 
2 183 
 379 
5 359 
2 326 

 339 
 585 
 80 

29 072 
 155 
3 043 
 185 
 526 
2 364 
 595 
 103 
3 344 
3 007 
1 637 
 72 
 194 

1 323 
 75 
 20 
 154 
1 685 
 475 
1 716 
 245 
 82 
 21 
4 683 
148 069 

 879 
 53 
 18 
 123 
1 684 
 381 
1 549 
 222 
 64 
– 
3 247 
130 164 

from 
carry-  
overs 

3 

 5 
 11 

 8 
 10 
 414 
 4 
 3 
 25 
 10 

 36 
 2 
 3 

 10 
 5 
 12 
 11 
 8 
 5 
 3 
 2 
 16 
 10 
 6 
 6 
 13 

 135 
 7 
 1 
 4 
– 
 16 
 5 
 3 
 3 
– 
 423 
1 236 

Payments made 
from 
assigned 
revenue 

Total 

% 

automatic 
carry-   
overs 

carry- 
overs by 
deci-  sion 

assigned 
revenue 

Appropriations carried over to 2017 

4 

5=2+3+4 

6=5/1 

7 

8 

 11 
 59 

 3 
 44 
2 488 
 64 
 9 
 396 
 113 

 95 
 2 
 2 

 40 
 2 
 299 
 6 
 16 
 24 
 19 
 2 
 133 
 317 
 360 
– 
 6 

 83 
 4 
 1 
 6 
 0 
 37 
 67 
 4 
 1 
– 
 305 
5 016 

1 529 
1 913 

 105 
8 873 
57 029 
2 251 
 392 
5 780 
2 449 

 469 
 589 
 85 

29 123 
 161 
3 354 
 202 
 550 
2 393 
 617 
 107 
3 493 
3 334 
2 002 
 78 
 213 

1 097 
 63 
 19 
 134 
1 684 
 435 
1 621 
 229 
 68 
– 
3 975 
136 416 

92% 
85% 

90% 
75% 
97% 
97% 
95% 
85% 
93% 

52% 
95% 
93% 

94% 
94% 
91% 
92% 
94% 
96% 
90% 
96% 
97% 
91% 
88% 
84% 
90% 

83% 
85% 
94% 
87% 
100% 
92% 
94% 
94% 
83% 
0% 
85% 
92% 

 5 
 15 

 8 
 12 
 203 
 4 
 3 
 29 
 15 

 46 
 2 
 3 

 10 
 5 
 12 
 10 
 8 
 7 
 3 
 3 
 21 
 11 
 7 
 7 
 15 

 121 
 6 
 1 
 5 
– 
 15 
 5 
 4 
 4 
– 
 474 
1 098 

– 
 0 

– 
– 
 433 
 0 
 0 
– 
 0 

– 
 0 
 0 

 31 
– 
 0 
– 
– 
 0 
– 
 0 
 0 
– 
 86 
 5 
 0 

– 
– 
– 
– 
– 
– 
 0 
– 
 0 
– 
– 
 557 

9 

 114 
 313 

 3 
 532 
1 330 
 59 
 7 
 994 
 162 

 385 
 5 
 2 

 36 
 5 
 332 
 6 
 25 
 73 
 33 
 2 
 70 
 52 
 173 
 0 
 6 

 97 
 5 
 1 
 15 
 0 
 25 
 71 
 5 
 1 
– 
 128 
5 062 

EUR millions 

from final 
adopted 
budget 

Appropriations lapsing 
from 
carry- 
overs 

from 
assigned 
revenue 

11 

12 

13 

Total 

14=11+ 
12+13 

 12 
 1 

 0 
2 381 
 28 
 6 
 9 
 6 
 1 

 0 
 26 
 0 

1 906 
 0 
 0 
 0 
 0 
 12 
 29 
 0 
 1 
 284 
 9 
 1 
 0 

 1 
 0 
 0 
 0 
 0 
 0 
 15 
 6 
 9 
 21 
 57 
4 823 

 1 
 1 

 1 
 4 
 16 
 0 
 0 
 2 
 1 

 5 
 0 
 0 

 1 
 0 
 1 
 1 
 1 
 1 
 1 
 0 
 2 
 2 
 1 
 2 
 2 

 8 
 0 
 0 
 1 
– 
 1 
 1 
 1 
 1 
– 
 49 
 109 

– 
– 

– 
 0 
– 
 1 
– 
– 
 0 

– 
– 
– 

– 
– 
– 
– 
– 
– 
– 
– 
– 
– 
– 
– 
– 

– 
– 
– 
– 
– 
– 
 3 
– 
– 
– 
– 
 3 

 13 
 2 

 1 
2 385 
 44 
 7 
 9 
 8 
 2 

 5 
 27 
 1 

1 908 
 0 
 1 
 1 
 2 
 13 
 29 
 0 
 3 
 286 
 10 
 2 
 3 

 8 
 0 
 0 
 1 
 0 
 1 
 19 
 7 
 9 
 21 
 106 
4 936 

Total 

10=7+8+
9 
 119 
 328 

 10 
 544 
1 965 
 63 
 11 
1 023 
 177 

 431 
 6 
 5 

 78 
 9 
 344 
 16 
 34 
 80 
 36 
 5 
 91 
 62 
 265 
 12 
 21 

 218 
 11 
 1 
 20 
 0 
 39 
 76 
 9 
 4 
– 
 602 
6 717 

                                       126 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
4.9.  POLICY AREA: MOVEMENTS IN COMMITMENTS OUTSTANDING (RAL) 

 Annual accounts of the European Union 2016 

Policy area 

Commitments outstanding at the end of previous year 

Commitments of the year 

Commitments 
carried forward 
from previous 
year 

Decommitments/Re
valuations/  
Cancellations 

Payments 

Commitments 
outstanding at 
year-end 

Commitments 
made during the 
year 

Payments 

Cancellation of 
commitments 
which cannot be 
carried over 

Commitments 
outstanding at 
year-end 

EUR millions 
Total commitments  
outstanding at the 
end of the year 

01 
02 

Economic and financial affairs 
Internal market, industry, entrepreneurship and 
SMEs 
Competition 
Employment, social affairs and inclusion 
Agriculture and rural development 

03 
04 
05 
06  Mobility and transport 
07 
08 
09 
10 
11  Maritime affairs and fisheries 
12 

Environment 
Research and innovation 
Communications networks, content and technology 
Direct research 

Financial stability, financial services and capital 
markets union 
Regional and urban policy 
Taxation and customs union 
Education and culture 
Communication 
Health and food safety 

13 
14 
15 
16 
17 
18  Migration and home affairs 
Foreign policy instruments 
19 
Trade 
20 
International cooperation and development 
21 
Neighbourhood and enlargement negotiations 
22 
Humanitarian aid and civil protection 
23 
Fight against fraud 
24 
Commission's policy coordination and legal advice 
25 
Commission's administration 
26 
Budget 
27 
Audit 
28 
Statistics 
29 
Pensions and related expenditure 
30 
Language services 
31 
Energy 
32 
Justice and consumers 
33 
Climate action 
34 
90 
Other Institutions 
Total 

1 884 
2 179 

 9 
33 275 
25 424 
5 883 
1 118 
12 813 
3 365 
 174 
2 201 
 12 

92 788 
 125 
2 801 
 56 
 503 
2 596 
 905 
 20 
9 572 
11 606 
 827 
 30 
 15 
 185 
 7 
 1 
 115 
– 
 17 
6 225 
 224 
 168 
 570 
217 693 

 (28) 
 (26) 

 (1) 
 (438) 
(1 340) 
 (114) 
 (2) 
 (107) 
 (20) 
 (19) 
 (53) 
 (2) 

 (286) 
 (6) 
 (52) 
 (3) 
 (46) 
 (168) 
 (46) 
 (1) 
 (278) 
 (306) 
 (5) 
 (2) 
 (2) 
 (9) 
 (0) 
 (0) 
 (7) 
– 
 (1) 
 (309) 
 (4) 
 (1) 
 (143) 
(3 825) 

(1 127) 
(1 145) 

 (8) 
(8 516) 
(12 274) 
(1 528) 
 (275) 
(3 844) 
(1 488) 
 (100) 
 (409) 
 (7) 

(28 491) 
 (73) 
(1 256) 
 (49) 
 (264) 
(1 096) 
 (339) 
 (13) 
(2 937) 
(2 547) 
 (542) 
 (19) 
 (13) 
 (169) 
 (7) 
 (1) 
 (50) 
– 
 (16) 
(1 325) 
 (91) 
 (43) 
 (420) 
(70 482) 

 728 
1 008 

– 
24 321 
11 810 
4 241 
 841 
8 863 
1 856 
 55 
1 740 
 3 

64 010 
 45 
1 494 
 4 
 193 
1 332 
 520 
 6 
6 358 
8 753 
 279 
 9 
– 
 8 
– 
– 
 57 
– 
– 
4 590 
 129 
 124 
 7 
143 386 

2 534 
2 409 

 105 
13 367 
63 466 
4 281 
 458 
6 386 
1 936 
 510 
1 071 
 87 

36 139 
 171 
3 249 
 211 
 573 
3 505 
 689 
 109 
3 349 
4 904 
2 231 
 79 
 216 
1 104 
 64 
 19 
 145 
1 684 
 437 
1 446 
 259 
 138 
3 979 
161 310 

 (401) 
 (768) 

 (97) 
 (357) 
(44 756) 
 (723) 
 (117) 
(1 937) 
 (961) 
 (369) 
 (180) 
 (78) 

 (631) 
 (88) 
(2 099) 
 (153) 
 (286) 
(1 297) 
 (278) 
 (94) 
 (557) 
 (787) 
(1 460) 
 (59) 
 (200) 
 (928) 
 (56) 
 (18) 
 (83) 
(1 684) 
 (418) 
 (296) 
 (138) 
 (25) 
(3 555) 
(65 935) 

– 
 (1) 

– 
 (0) 
 (0) 
– 
– 
 (0) 
 (0) 
 (0) 
 (0) 
 (0) 

 (0) 
– 
 (0) 
 (0) 
– 
– 
 (0) 
– 
 (0) 
 (0) 
– 
– 
– 
– 
– 
– 
 (0) 
– 
– 
– 
– 
– 
0 
 (3) 

2 133 
1 640 

 8 
13 010 
18 710 
3 558 
 341 
4 449 
 975 
 141 
 891 
 9 

35 508 
 83 
1 150 
 58 
 287 
2 207 
 410 
 16 
2 792 
4 117 
 770 
 20 
 16 
 176 
 8 
 1 
 62 
– 
 19 
1 150 
 121 
 113 
 424 
95 373 

2 861 
2 648 

 8 
37 331 
30 520 
7 799 
1 182 
13 312 
2 832 
 196 
2 630 
 13 

99 518 
 128 
2 644 
 62 
 480 
3 539 
 930 
 22 
9 150 
12 870 
1 050 
 29 
 16 
 184 
 8 
 1 
 119 
– 
 19 
5 740 
 250 
 237 
 431 
238 759 

                                       127 

 
 
 
 
 
 
 
 
 
 
 
 
 
 Annual accounts of the European Union 2016 

4.10.  POLICY AREA: COMMITMENTS OUTSTANDING BY YEAR OF ORIGIN 

Policy area 

< 2010 

2010 

2011 

2012 

2013 

2014 

2015 

2016 

01 
02 

Economic and financial affairs 
Internal market, industry, entrepreneurship and 
SMEs 
Competition 
Employment, social affairs and inclusion 
Agriculture and rural development 

03 
04 
05 
06  Mobility and transport 
07 
08 
09 
10 
11  Maritime affairs and fisheries 
12 

Environment 
Research and innovation 
Communications networks, content and technology 
Direct research 

Financial stability, financial services and capital 
markets union 
Regional and urban policy 
Taxation and customs union 
Education and culture 
Communication 
Health and food safety 

13 
14 
15 
16 
17 
18  Migration and home affairs 
Foreign policy instruments 
19 
Trade 
20 
International cooperation and development 
21 
Neighbourhood and enlargement negotiations 
22 
Humanitarian aid and civil protection 
23 
Fight against fraud 
24 
Commission's policy coordination and legal advice 
25 
Commission's administration 
26 
Budget 
27 
Audit 
28 
Statistics 
29 
Pensions and related expenditure 
30 
Language services 
31 
Energy 
32 
Justice and consumers 
33 
Climate action 
34 
Other Institutions 
90 

 11 
 13 

– 
 382 
 34 
 100 
 80 
 77 
 29 
 9 
 85 
– 

1 022 
– 
 83 
– 
 14 
 45 
 12 
– 
 227 
 414 
 22 
– 
– 
– 
– 
– 
– 
– 
– 
 225 
 0 
– 
0 
2 884 

 0 
 11 

– 
 6 
– 
 64 
 58 
 112 
 16 
 2 
 0 
– 

 1 
– 
 26 
– 
 3 
 46 
 5 
– 
 219 
 290 
 25 
– 
– 
– 
– 
– 
– 
– 
– 
 491 
 0 
– 
0 
1 376 

– 
 29 

– 
 265 
– 
 249 
 68 
 318 
 37 
 1 
 13 
– 

 8 
 0 
 66 
 0 
 5 
 67 
 11 
 0 
 331 
 473 
 24 
– 
– 
– 
– 
– 
 0 
– 
– 
 142 
 4 
– 
0 
2 111 

 117 
 93 

– 
 420 
 2 
 508 
 98 
 705 
 141 
 1 
 27 
– 

 825 
 0 
 128 
 0 
 10 
 158 
 38 
 0 
 699 
 993 
 23 
 0 
– 
– 
– 
– 
 0 
– 
– 
 496 
 6 
– 
0 
5 488 

 244 
 86 

– 
4 112 
 868 
 571 
 137 
1 686 
 298 
 11 
 286 
 0 

14 947 
 1 
 220 
 0 
 15 
 322 
 55 
 1 
1 237 
1 507 
 22 
 1 
– 
 2 
– 
– 
 3 
– 
– 
1 273 
 13 
 1 
0 
27 920 

 10 
 144 

– 
4 118 
 985 
1 321 
 181 
2 835 
 615 
 11 
 26 
 1 

5 750 
 11 
 436 
 0 
 52 
 111 
 168 
 1 
1 525 
2 037 
 28 
 3 
– 
 1 
– 
– 
 17 
– 
– 
1 053 
 36 
 54 
0 
21 530 

 346 
 633 

 0 
15 018 
9 921 
1 430 
 217 
3 129 
 721 
 19 
1 302 
 3 

41 459 
 32 
 535 
 4 
 93 
 583 
 231 
 4 
2 120 
3 039 
 135 
 6 
 0 
 4 
 (0) 
– 
 37 
– 
 (0) 
 910 
 70 
 69 
0 
82 069 

2 133 
1 640 

 8 
13 010 
18 710 
3 558 
 341 
4 449 
 975 
 141 
 891 
 9 

35 508 
 83 
1 150 
 58 
 287 
2 207 
 410 
 16 
2 792 
4 117 
 770 
 20 
 16 
 176 
 8 
 1 
 62 
– 
 19 
1 150 
 121 
 113 
 431 
95 380 

                                       128 

EUR millions 
Total 

2 861 
2 648 

 8 
37 331 
30 520 
7 799 
1 182 
13 312 
2 832 
 196 
2 630 
 13 

99 518 
 128 
2 644 
 62 
 480 
3 539 
 930 
 22 
9 150 
12 870 
1 050 
 29 
 16 
 184 
 8 
 1 
 119 
– 
 19 
5 740 
 250 
 237 
 431 
238 759 

 
 
 
 
 
 
 
 
 
 
 
 
 
5. 

IMPLEMENTATION OF THE BUDGET BY INSTITUTION 

 Annual accounts of the European Union 2016 

5.1.  IMPLEMENTATION OF BUDGET REVENUE 

EUR millions 

Outstanding 

Receipts 
as  
% of 
budget 

Income appropriations 

Entitlements established 

Initial 
adopted 
budget 

143 548 
 8 
 20 
 52 
 11 

Final 
adopted 
budget 

136 305 
 8 
 20 
 52 
 11 

 50 

 1 

 41 

 50 

 1 

 41 

Current 
year 

Carried 
over 

143 854 
 11 
 20 
 50 
 15 

 76 

 1 

 269 

7 119 
– 
 0 
 0 
– 

 3 

– 

 1 

Total 

150 972 
 11 
 20 
 50 
 15 

 79 

 1 

On 
entitlem. 
of current 
year 
141 804 
 11 
 20 
 50 
 15 

 75 

 1 

 269 

 268 

Revenue 

On 
entitlem. 
carried 
over 

2 285 
– 
 0 
 0 
– 

Total 

144 089 
 11 
 20 
 50 
 15 

106% 
133% 
99% 
97% 
142% 

 2 

– 

 1 

 78 

154% 

 1 

95% 

 268 

659% 

6 883 
 0 
 0 
 0 
– 

 2 

– 

 1 

 153 
 1 
143 885 

 153 
 1 
136 642 

 186 
 1 
144 483 

 19 
– 
7 141 

 205 
 1 
151 624 

 181 
 1 
142 427 

 2 
– 
2 290 

 183 
 1 
144 717 

119% 
91% 
106% 

 22 
– 
6 907 

Institution 

Commission 
Committee of the Regions 
Court of Auditors 
Court of Justice 
Economic and Social 
Committee 
European Council and 
Council 
European Data Protection 
Supervisor 
European External Action 
Service 
European Parliament 
Ombudsman 
Total 

The consolidated reports on the implementation of the general budget of the EU include, as in previous years, the budget implementation of all Institutions 
since within the EU budget a separate budget for each Institution is established. Agencies do not have a separate budget inside the EU budget and they are 
partially financed by a Commission budget subsidy.  

Concerning the EEAS, it should be noted that, in addition to its own budget, it also receives contributions from the Commission of EUR 140 million (2015: 
EUR 138 million) and the EDF of EUR 44 million (2015: EUR 61 million). These budget credits are put at the disposal of the EEAS (as assigned revenue) so 
as to cover primarily the costs of Commission staff working in the EU delegations, these delegations being administratively managed by the EEAS.   

                                       129 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 Annual accounts of the European Union 2016 

5.2.  IMPLEMENTATION OF COMMITMENT APPROPRIATIONS 

Commitments made 

Appropriations carried over to 2017 

Appropriations lapsing 

EUR millions 

Institution 

Total appropria-
tions available 

from final 
adopted 
budget 
2 

from 
carry-  
overs 
3 

from 
assigned 
revenue 
4 

Total 

% 

5=2+3+4 

6=5/1 

from 
assigned 
revenue 
7 

carry-  
overs by 
decision 
8 

Total 

9=7+8 

from final 
adopted 
budget 
10 

from carry- 
overs 

11 

from 
assigned 
revenue 
12 

 575 
– 
– 
– 
– 

– 

– 

– 

– 
– 
 575 

4 991 
 0 
 0 
 1 
 0 

 23 

– 

 40 

 21 
– 
5 077 

 224 
 1 
 1 
 7 
 4 

 26 

 1 

 2 

 15 
 0 
 281 

 22 
– 
– 
– 
– 

 0 

– 

 0 

– 
– 
 22 

– 
 0 
 0 
 0 
 0 

 0 

 0 

 0 

 0 
 0 
– 

Total 

13=10+ 
11+12 

 246 
 1 
 1 
 7 
 4 

 26 

 1 

 2 

 15 
 0 
 303 

Commission 
Committee of Regions 
Court of Auditors 
Court of Justice 
Economic and Social 
Committee 
European Council and 
Council 
European Data-
protection Supervisor 
European External 
Action Service 
European Parliament 
Ombudsman 
Total 

1 

162 569 
 93 
 138 
 382 
 135 

 591 

 9 

 877 

150 699 
 89 
 136 
 373 
 127 

 519 

 9 

 634 

 778 
– 
– 
– 
– 

 2 

– 

 1 

5 854 
 2 
 0 
 1 
 4 

 21 

– 

157 332 
 91 
 136 
 374 
 131 

97% 
98% 
99% 
98% 
97% 

 541 

92% 

 9 

95% 

 200 

 835 

95% 

4 416 
 0 
 0 
 1 
 0 

 23 

– 

 40 

1 886 
 11 
166 690 

1 824 
 10 
154 421 

– 
– 
 781 

 26 
– 
6 108 

1 850 
 10 
161 310 

98% 
95% 
97% 

 21 
– 
4 502 

                                       130 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 Annual accounts of the European Union 2016 

5.3.  IMPLEMENTATION OF PAYMENT APPROPRIATIONS 

Institution 

Total 
appropriat. 
available 

from final 
adopted 
budget 

from 
carry-
overs 

from 
assigned 
revenue 

Payments made 

Total 

% 

Appropriations carried over to 2017 

automatic 
carry-
overs 

carry-
overs by 
decision 

from 
assigned 
revenue 

Total 

1 

2 

3 

4 

5=2+3+4 

6=5/1 

7 

8 

9 

 624 
 8 
 9 
 22 

 8 

 62 

 1 

 77 

 557 
– 
– 
– 

– 

– 

– 

– 

from 
final 
adopted 
budget 
11 

4 766 
 1 
 1 
 7 

 4 

 26 

 1 

 2 

10=7+8
+9 
6 115 
 9 
 9 
 23 

 9 

 86 

 1 

4 934 
 0 
 0 
 1 

 1 

 23 

– 

 62 

 139 

Appropriations lapsing 

from 
carry-
overs 

from 
assigned 
revenue 

12 

13 

 60 
 1 
 1 
 2 

 4 

 9 

 0 

 11 

 21 
 0 
 109 

 3 
 0 
 0 
 0 

 0 

 0 

 0 

– 

 0 
 0 
 3 

Total 

14=11+ 
12+13 

4 830 
 3 
 2 
 9 

 7 

 35 

 1 

 13 

 36 
 1 
4 936 

 285 
 1 
1 098 

– 
– 
 557 

 40 
– 
5 062 

 325 
 1 
6 717 

 15 
 0 
4 823 

Commission 
Committee of Regions 
Court of Auditors 
Court of Justice 
Economic and Social 
Committee 
European Council and 
Council 
European Data-
protection Supervisor 
European External 
Action Service 
European Parliament 
Ombudsman 
Total 

143 386 
 102 
 147 
 401 

126 917 
 81 
 127 
 351 

 145 

 636 

 10 

 968 

 119 

 457 

 8 

 557 

 813 
 7 
 9 
 18 

 7 

 38 

 1 

 75 

2 262 
 11 
148 069 

1 539 
 9 
130 164 

 268 
 1 
1 236 

4 711 
 2 
 0 
 1 

 3 

 20 

– 

 185 

 94 
– 
5 016 

132 442 
 90 
 136 
 370 

 129 

92% 
89% 
92% 
92% 

89% 

 515 

81% 

 9 

84% 

 816 

84% 

1 900 
 10 
136 416 

84% 
86% 
92% 

                                       131 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Annual accounts of the European Union 2016 

6. 

IMPLEMENTATION OF THE AGENCIES' BUDGET 

6.1.  BUDGET REVENUE 

Agency 

Agency for the Cooperation of Energy Regulators 
- ACER 
Body of European Regulators for Electronic 
Communications - BEREC 
Community Plant Variety Office - CPVO 
Consumers, Health, Agriculture and Food 
Executive Agency - CHAFEA 
Education, Audiovisual and Culture Executive 
Agency - EACEA 
European Agency for Safety and Health at Work 
- EU-OSHA 
European Agency for the Operational 
Management of Large-Scale IT Systems in the 
Area of Freedom, Security and Justice - eu-LISA 
European Asylum Support Office - EASO 
European Aviation Safety Agency - EASA 
European Banking Authority - EBA 
European Border and Coast Guard Agency - 
Frontex 
European Centre for Disease Prevention and 
Control - ECDC 
European Centre for the Development of 
Vocational Training - CEDEFOP 
European Chemicals Agency - ECHA 
European Environment Agency - EEA 
European Fisheries Control Agency - EFCA 
European Food Safety Authority - EFSA  
European Foundation for the Improvement of 
Living and Working Conditions - Eurofound 
European Global Navigation Satellite Systems 
(GNSS) Agency 
European Institute for Gender Equality - EIGE 
European Institute of Innovation and Technology 
- EIT 
European Insurance and Occupational Pensions 
Authority - EIOPA 
European Maritime Safety Agency - EMSA 
European Medicines Agency - EMA 
European Monitoring Centre for Drugs and Drug 
Addiction - EMCDDA 
European Police Office 
European Research Council Executive Agency - 
ERCEA 
European Securities and Markets Authority - 
ESMA 
European Training Foundation - ETF 
European Union Agency for Fundamental Rights 
- FRA 

Funding 
Commission 
Policy Area 
6 

9 

17 
17 

15 

4 

18 

18 
6 
12 
18 

17 

15 

2 
7 
11 
17 
4 

6 

4 
15 

12 

6 
2 
18 

18 
8 

12 

15 
18 

    132 

Final adopted 
budget 

EUR millions 

Amounts 
received 

16 

4 

16 
9 

49 

15 

80 

53 
193 
36 
233 

58 

18 

103 
42 
10 
79 
21 

29 

8 
264 

22 

71 
308 
15 

104 
43 

39 

20 
22 

16 

4 

13 
9 

49 

15 

97 

53 
140 
37 
252 

58 

18 

105 
57 
10 
79 
21 

223 

8 
264 

22 

71 
305 
15 

117 
43 

39 

20 
22 

 
 
 
 
 
 
Annual accounts of the European Union 2016 

Agency 

European Union Agency for Law Enforcement 
Training - CEPOL 
European Union Agency for Network and 
Information Security - ENISA 
European Union Agency for Railways 
European Union Intellectual Property Office - 
EUIPO 
European Union's Judicial Cooperation Unit - 
EUROJUST 
Executive Agency for Small and Medium-sized 
Enterprises - EASME 
Fusion for Energy - F4E 
Innovation and Networks Executive Agency - 
INEA 
Research Executive Agency - REA 
Translation Centre for the Bodies of the 
European Union 
Total 

Funding 
Commission 
Policy Area 
18 

9 

6 
12 

33 

6 

8 
6 

8 
15 

Type of revenue 

Commission subsidy 
Fee income 
Other income 
Total 

Final adopted 
budget 

EUR millions 

Amounts 
received 

9 

11 

28 
418 

44 

36 

720 
22 

60 
51 

10 

11 

28 
231 

44 

36 

724 
22 

60 
42 

3 377 

3 389 

Final adopted 
budget 
1 524 
 642 
1 211 
3 377 

EUR millions 
Amounts 
received 
1 540 
 638 
1 211 
3 389 

    133 

 
 
 
 
 
 
 
 
 
 
 
 
 
Annual accounts of the European Union 2016 

6.2.  COMMITMENT AND PAYMENT APPROPRIATIONS BY 

AGENCY 

Agency 

Agency for the Cooperation of Energy 
Regulators - ACER 
Body of European Regulators for 
Electronic Communications - BEREC 
Community Plant Variety Office - CPVO 
Consumers, Health, Agriculture and 
Food Executive Agency - CHAFEA 
Education, Audiovisual and Culture 
Executive Agency - EACEA 
European Agency for Safety and Health 
at Work - EU-OSHA 
European Agency for the Operational 
Management of Large-Scale IT 
Systems in the Area of Freedom, 
Security and Justice - eu-LISA 
European Asylum Support Office - 
EASO 
European Aviation Safety Agency - 
EASA 
European Banking Authority - EBA 
European Border and Coast Guard 
Agency - Frontex 
European Centre for Disease 
Prevention and Control - ECDC 
European Centre for the Development 
of Vocational Training - CEDEFOP 
European Chemicals Agency - ECHA 
European Environment Agency - EEA 
European Fisheries Control Agency - 
EFCA 
European Food Safety Authority - EFSA  
European Foundation for the 
Improvement of Living and Working 
Conditions - Eurofound 
European Global Navigation Satellite 
Systems (GNSS) Agency 
European Institute for Gender Equality 
- EIGE 
European Institute of Innovation and 
Technology - EIT 
European Insurance and Occupational 
Pensions Authority - EIOPA 
European Maritime Safety Agency - 
EMSA 
European Medicines Agency - EMA 
European Monitoring Centre for Drugs 
and Drug Addiction - EMCDDA 
European Police Office 
European Research Council Executive 
Agency - ERCEA 
European Securities and Markets 
Authority - ESMA 
European Training Foundation - ETF 

Commitment appropriations 

Total 
appropriat. 
available  
 16 

 4 

 18 
 9 

 49 

 17 

 85 

 66 

 220 

 36 
 256 

 59 

 19 

 113 
 69 
 10 

 80 
 21 

Commit- 
ments made 

 16 

 4 

 17 
 9 

 48 

 16 

 80 

 53 

 160 

 35 
 244 

 58 

 19 

 110 
 64 
 10 

 80 
 21 

3 331 

1 104 

 8 

 285 

 22 

 80 

 314 
 16 

 122 
 43 

 42 

 21 

    134 

 8 

 271 

 22 

 72 

 301 
 16 

 115 
 43 

 40 

 21 

EUR millions 

Payment appropriations 
Payments 
Total 
made 
appropriat. 
available  
 18 

 12 

 5 

 17 
 10 

 54 

 21 

 104 

 55 

 226 

 40 
 300 

 69 

 20 

 124 
 74 
 11 

 88 
 24 

 626 

 10 

 267 

 25 

 82 

 347 
 17 

 133 
 45 

 47 

 21 

 4 

 15 
 8 

 47 

 15 

 94 

 35 

 144 

 35 
 199 

 56 

 18 

 106 
 50 
 9 

 79 
 20 

 139 

 8 

 265 

 22 

 66 

 294 
 16 

 112 
 43 

 38 

 21 

 
 
 
 
 
 
 
 
Annual accounts of the European Union 2016 

Commitment appropriations 

Agency 

European Union Agency for 
Fundamental Rights - FRA 
European Union Agency for Law 
Enforcement Training - CEPOL 
European Union Agency for Network 
and Information Security - ENISA 
European Union Agency for Railways 
European Union Intellectual Property 
Office - EUIPO 
European Union's Judicial Cooperation 
Unit - EUROJUST 
Executive Agency for Small and 
Medium-sized Enterprises - EASME 
Fusion for Energy - F4E 
Innovation and Networks Executive 
Agency - INEA 
Research Executive Agency - REA 
Translation Centre for the Bodies of 
the European Union 
Total 

Total 
appropriat. 
available  
 22 

 10 

 11 

 28 
 450 

 44 

 36 

 764 
 22 

 60 
 51 

Commit- 
ments made 

 22 

 9 

 11 

 28 
 238 

 44 

 36 

 763 
 22 

 60 
 45 

EUR millions 

Payment appropriations 
Payments 
Total 
made 
appropriat. 
available  
 28 

 22 

 11 

 12 

 30 
 453 

 47 

 41 

 730 
 23 

 63 
 55 

 9 

 10 

 28 
 214 

 39 

 36 

 716 
 22 

 59 
 46 

6 926 

4 330 

4 376 

3 169 

Type of expenses 

Staff 
Administrative expenses 
Operational expenses 
Total 

Commitment appropriations 

Total 
appropriat. 
available  
1,054 
367 
5,505 
6 926 

Commit- 
ments made 

1,033 
341 
2,956 
4 330 

EUR millions 

Payment appropriations 
Payments 
Total 
made 
appropriat. 
available  
1,069 
431 
2,875 
4 376 

1,029 
330 
1,811 
3 169 

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Annual accounts of the European Union 2016 

GLOSSARY 

Actuarial assumptions 

Assumptions used to calculate the costs of future events that affect the pension liability. 

Actuarial gains and losses 

For  a  defined  benefit  scheme,  the  changes  in  actuarial  deficits  or  surpluses.  They  arise  as  a  result  of 
differences between the previous actuarial assumptions and what has actually occurred and due to effects of 
changes in actuarial assumptions. 

Administrative appropriations 

Administrative appropriations cover the running costs of the Institutions and entities (staff, buildings, office 
equipment). 

Adopted budget 

Draft budget becomes the adopted budget as soon as it is approved by the Budgetary Authority. 

Amending budget 

Decision  adopted  during  the  budget  year  to  amend  (increase,  decrease,  transfer)  aspects  of  the  adopted 
budget of that year. 

Amounts to be called from Member States 

These represent expenses incurred during the reporting period that will need to be funded by future budgets, 
i.e.  by  the  EU  Member  States.  This  is  a  consequence  of  the  co-existence  of  accruals  based  financial 
statements and a cash based budget. 

Annual Activity Report (AAR) 

Annual Activity Reports indicate the results of operations by reference to objectives set, associated risks and 
the form of internal control, inter alia. Since the 2001 budget exercise for the Commission and since 2003 for 
all  European  Union  (EU)  institutions,  the  ‘authorising  officer  by  delegation’  must  submit  an  AAR  to  his/her 
institution on the performance of his/her duties, together with financial and management information. 

Appropriations 

Budget  funding.  The  budget  forecasts  both  commitments  and  payments  (cash  or  bank  transfers  to  the 
beneficiaries).  Appropriations  for  commitments  and  payments  often  differ  (differentiated  appropriations) 
because multi annual programmes and projects are usually fully committed in the year they are decided and 
are paid over the years as the implementation of the programme and project progresses. Non-differentiated 
appropriations apply to administrative expenditure, for agricultural market support and direct payments and 
commitment appropriations equal payment appropriations. 

Assigned revenue 

Dedicated  revenue  received  to  finance  specific  items  of  expenditure.  The  main  source  of  external  assigned 
revenue  is  financial  contributions  from  third  countries  to  programmes  financed  by  the  Union.  The  main 
source  of  internal  assigned  revenue  is  revenue  from  third  parties  in  respect  of  goods,  services  or  work 
supplied  at  their  request;  revenue  arising  from  the  repayment  of  amounts  wrongly  paid  and  revenue  from 
the sale of publications and films, including those on an electronic medium. 

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Available for sale financial assets 

All  financial  assets  (except  derivatives)  that  are  according  to  International  Public  Sector  Accounting 
Standards measured at fair value and for which the changes in fair value are to be recognised in a reserve in 
net assets until derecognition (or impairment). 

Budget line 

As far as the budget structure is concerned, revenue and expenditure are shown in the budget in accordance 
with  a  binding  nomenclature  which  reflects  the  nature  and  purpose  of  each  item,  as  imposed  by  the 
budgetary authority. The individual headings (title, chapter, article or line) provide a formal description of the 
nomenclature. 

Cancellation of appropriations 

Unused appropriations that may no longer be used. 

Carryover of appropriations 

Exception to  the principle of  annuality  in so far  as appropriations that could not be used in  a given  budget 
year may, under strict conditions, be exceptionally carried over for use during the following year. 

Commitment 

Legal pledge to provide finance subject to certain conditions. The EU commits itself to reimbursing its share 
of the costs of an EU-funded project. Today’s commitments are tomorrow’s payments. Today’s payments are 
yesterday’s commitments. 

Commitment appropriation 

Commitment appropriations cover the total cost of legal obligations (contracts, grant agreements/decisions) 
that could be signed in the current financial year. 

Current service cost 

The increase in scheme liabilities arising from service in the current financial year. 

Decommitment 

An act whereby a previous commitment (or part of it) is cancelled. 

Defined benefit scheme 

A  pension or  other retirement benefit  scheme where  the scheme rules define the benefits independently  of 
the  contributions  payable,  and  the  benefits  are  not  directly  related  to  the  investments  of  the  scheme.  The 
scheme may be funded or unfunded. 

Derivatives 

Financial  instruments  whose  value  is  linked  to  changes  in  the  value  of  another  financial  instrument,  an 
indicator  or  a  commodity.  In  contrast  to  the  holder  of  a  primary  financial  instrument  (e.g.  a  government 
bond),  who  has  an  unqualified  right  to  receive  cash  (or  some  other  economic  benefit)  in  the  future,  the 
holder  of  a  derivative  has  only  a  qualified  right  to  receive  such  a  benefit.  An  example  of  a  derivative  is 
currency forward contract. 

Direct management 

Mode  of  budget  implementation.  Under  direct  management  the  budget  is  implemented  directly  by 
Commission services, Executive Agencies or Trust Funds. 

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Discount rate 

The rate used to adjust for the time value of money. Discounting is a technique used to compare costs and 
benefits that occur in different time periods. 

Effective interest rate 

The  rate  that  discounts  estimated  future  cash  receipts  or  payments  over  the  expected  life  of  the  financial 
asset or financial liability to the net carrying amount of the asset or liability.  

Financial assets or liabilities at fair value through surplus or deficit 

All  financial  assets  or  liabilities  that  are  according  to  International  Public  Sector  Accounting  Standards 
measured at fair value and for which the changes in fair value are to be recognised in surplus or deficit of the 
period (i.e. derivatives). 

Financial correction 

The  purpose  of  financial  corrections  is  to  protect  the  EU  budget  from  the  burden  of  erroneous  or  irregular 
expenditure. For expenditure under shared management, the task of recovering incorrectly made payments 
is primarily the responsibility of the Member State. 

A  'confirmed'  financial  correction  has  been  accepted  by  the  Member  State  concerned.  A  'decided'  financial 
correction  has  been  adopted  by  a  Commission  decision  and  is  always  a  net  correction,  where  the  Member 
State is required to reimburse irregular funds to the EU budget, thus leading to a definitive reduction of the 
allocated envelope to the Member State concerned. Confirmed and decided financial corrections are reported 
in this publication as one category. 

An 'implemented' financial correction has corrected the observed irregularity. 

Indirect management 

Mode  of  budget  implementation.  Under  indirect  management  the  Commission  confers  tasks  of  budget 
implementation to bodies of EU law or national law. 

Interruptions and suspensions 

If  the  Commission  finds,  based  on  its  own  work  or  the  information  reported  by  audit  authorities,  that  a 
Member State has failed to remedy serious shortcomings in the management and control systems and/or to 
correct irregular expenditure which had been declared and certified, it may interrupt or suspend payments. 

Irregularity 

An irregularity is an act which does not comply with EU rules and which has a potentially negative impact on 
EU  financial  interests,  but  which  may  be  the  result  of  genuine  errors  committed  either  by  beneficiaries 
claiming  funds  or  by  the  authorities  responsible  for  making  payments.  If  an  irregularity  is  committed 
deliberately, it constitutes fraud. 

Lapsing appropriations 

Unused appropriations to be cancelled at the end of the financial year. Lapsing means the cancellation of all 
or  part  of  the  authorisation  to  make  expenditures  and/or  incur  liabilities  which  is  represented  by  an 
appropriation. 

Own resources 

Represent  the  main  funding  for  the  EU  institutions  and  bodies  and  are  defined  in  the  own  resources 
regulation  609/2014.  Own  resources  comprise  GNI-based  resources,  VAT-based  resources  and  traditional 
own resources. 

Payment appropriations 

Payment appropriations cover expenditure due in the current year, arising from legal commitments entered 
in the current year and/or earlier years. 

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Pre-financing 

A  payment  intended  to  provide  the  beneficiary  with  a  float.  It  may  be  split  into  a  number  of  payments  in 
accordance  with  the  provisions  of  the  underlying  contract,  decision,  agreement  or  the  basic  legal  act.  The 
float  or  advance  is  either  used  for  the  purpose  for  which  it  was  provided  during  the  period  defined  in  the 
agreement or it is repaid. 

Preventive measure 

Preventive measures, which are at the Commission’s disposal to protect the EU budget when it is aware of 
potential  deficiencies,  include  suspensions  and  interruptions  of  payments  from  the  EU  budget  to  the 
operational programme. 

Reste à Liquider (RAL) 

Represents the amount where a budgetary commitment has been made but the subsequent payment is not 
yet  done.  They  represent  payment  obligations  for  the  EU  for  future  years  and  stem  directly  from  the 
existence  of  multi  annual  programmes  and  the  dissociation  between  commitment  and  payment 
appropriations. 

Shared management 

Mode  of  budget  implementation.  Under  shared  management  budget  implementation  tasks  are  delegated  to 
Member States. About 80 % of the EU expenditure falls under this implementation mode. 

Traditional own resources 

These represent revenue for the EU and are part of the 'own resources' which fund the activities of the EU. 
Traditional own resources are defined in the own resource regulation 609/2014 and comprise customs duties 
and sugar levies. 

Transfers (between budget lines) 

Transfers between budget lines imply the relocation of appropriations from one budget line to another, in the 
course  of  the  financial  year,  and  thereby  they  constitute  an  exception  to  the  budgetary  principle  of 
specification.  They  are,  however,  expressly  authorised  by  the  Treaty  on  the  Functioning  of  the  European 
Union  under  the  conditions  laid  down  in  the  Financial  Regulation  (FR).  The  FR  identifies  different  types  of 
transfers depending on whether they are between or within budget titles, chapters, articles or headings and 
require different levels of authorisation. 

    139